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Discussion of “real effects of lagged guidance from prudential regulators on CECL”

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  • Ryan, Stephen G.

Abstract

Basu, Roychowdhury, and Sinha (BRS, this issue) examine effects of U.S. bank regulators’ provision of guidance regarding the incorporation of the current expected credit loss (CECL) approach in capital regulation two and a half years after the issuance of ASU 2016-13. BRS argue and provide evidence that, for CECL-adopting banks and their borrowers in syndicated corporate loans, this lagged provision of guidance adversely affected (1) the amounts and interest rates for more affected term loan As (TLAs) typically held by originating banks compared to less affected term loan Bs (TLBs) typically sold to institutional lenders; and (2) investments by TLA-dependent borrowers compared to other borrowers. In this discussion, I highlight BRS’s importance and attractive research-design features, making a few criticisms and suggestions. I discuss the lack of alternatives to the provision of lagged guidance and the limited generalizability of the study’s setting, approach, and results beyond banks and ASU 2016-13.

Suggested Citation

  • Ryan, Stephen G., 2025. "Discussion of “real effects of lagged guidance from prudential regulators on CECL”," Journal of Accounting and Economics, Elsevier, vol. 80(2).
    • Handle: RePEc:eee:jaecon:v:80:y:2025:i:2:s0165410125000436
    DOI: 10.1016/j.jacceco.2025.101807
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    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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