Key Takeaways from AICPA Banks and Savings Conference

Hundreds of members of the banking industry descended upon our nation’s capital this week for the AICPA National Conference on Banks & Savings Institutions.The event focused on equipping accountants, financial executives and auditors to handle the profound volume and speed of regulatory and compliance changes. 

Given the current banking industry climate, and the fact that we are on the upturn from one of the most damaging financial crises in U.S. history, we were not surprised by the reactive tone of the conference. 

Economists were cautiously optimistic, referring to 2013 as “the year of positive surprises,” and to 2014 as “the year of volatility.” The volatility seen in 2014 is coming from a shift from all things economic, to foreign policy and social issues. 

Featured speakers offered information and actionable guidance on topics spanning the Dodd-Frank Act, mortgage banking, financial stability initiatives, accounting standards and Basel III. Perhaps most valuable, conference presenters discussed the ways in which the U.S. consumer base has evolved as a result of the financial crisis. A few of the highlights include:

• Consumers are showing signs of being more fiscally responsible
• Household formation has slowed
• There is a shift from home ownership to rental 
• Some questions still exists around the impact that the Affordable Care Act will have on consumer spending 

For banks, this insight is valuable for understanding the customer base, lending prospects and strategic opportunities. 

It seems we have finally moved out of the financial crisis, yet no one is quite ready to move on. That said, regulatory bodies are surging forward with more regulation and oversight. Big changes are coming. They have names like Mr. Dodd and Mr. Frank, Basel and CECL, the proposed standard on “Current Expected Credit Losses.”  

CECL is one of the most significant changes, as it will shift banks’ allowance for loan loss methodology from an incurred loss model to an expected loss model. Under the expected loss model, bankers can expect a more heft allowance and should begin to prepare for the change immediately; because it will take a few years to accumulate the data needed to build a reliable estimation process.  

We expect to see other changes with regard to the classification and measurement of financial assets and liabilities. Discussion also will continue to address forward-looking information and the voluminous nature of accounting standards and disclosure requirements.  

For an industry historically slow to evolve, things are changing in big ways. What impact is it having on the current and future state of your financial institution? How can we help you navigate forward?