Is the New CECL SCALE Tool Right for your Community Bank?

For the next group of current expected credit loss (CECL) model adopters, the January 2023 deadline for calendar year institutions gets closer with each week. Many community banks have expressed concerns about expected operational difficulties with meeting the requirements. To help, the Federal Reserve (Fed) introduced the Scale CECL Allowance for Loss Estimator (SCALE) tool to provide banks with less than $1 billion in assets an accessible method for estimating allowance for credit losses (ACL).

SCALE is a simple, spreadsheet-based method; however, determining if the tool is right for your financial institution largely depends on your internal resources and where you are in the implementation timeline. You may link to the SCALE tool and instructions here for additional guidance, FAQs and a webinar from the Fed on the tool.

What is SCALE?

The SCALE method uses publicly available data from Schedule RI-C of the Call Report to determine the initial proxy of expected lifetime loss rates. With this tool, your bank’s management team would be required to use their judgement for any adjustment to the proxy expected lifetime loss rates to arrive at the final ACL estimates, taking into consideration matters specific to your institution. That judgement should adequately reflect the loss history and credit risk in your institution’s portfolio.

Is SCALE Right for Your Institution

SCALE is one of many acceptable CECL methods your bank may use to estimate the ACL. Determining which method is appropriate for your institution depends on your size, as well as the nature, scope and risk of your lending and investing activities. The following observations and guidance from the SCALE site1 might also inform your decision:

  • “The SCALE method is not a regulator preferred method for estimating ACLs.”
  • “The SCALE method does not ensure compliance with U.S. GAAP or any other regulatory requirement.”
  • “Ultimately, bank management is responsible for maintaining ACLs at appropriate levels based on management’s current judgements about the credit quality of the bank’s financial assets.”
  • “The bank’s use of any method for estimating ACLs should be well-documented, with clear explanations of the supporting analyses and rationale.”
How DHG Can Help

Through our experience with the first round of CECL adopters, we observed that starting the process early and adequate documentation were key to smooth implementation. As a PCAOB-registered firm consisting of professionals with a deep understanding of the reporting requirements and compliance for highly regulated banks like yours, you can look to DHG’s Financial Services team to help determine if SCALE is the right option for your CECL implementation, as well as to assist in the overall execution in adopting the new standard.

We look forward to answering your questions about SCALE and learning how we can help your institution with your implementation of CECL before the January 2023 adoption deadline. Reach out to us at


[1] “SCALE FAQs.” Scaled CECL Allowance for Losses Estimator (SCALE) Method and Tool. Supervision Outreach, 2021.


Adam Thomas
Office Managing Partner / Tampa Bay

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Senior Manager

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