CECL macroeconomic scenarios for expected credit loss modelling

Independent baseline, upside and downside forecasts for US lenders, with national, 50-state and DC coverage. Built on our proprietary stress testing model and the expert judgement of award-winning economists, every scenario is audit-ready and designed for both regulatory requirements and business planning.

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What is CECL?

CECL (Current Expected Credit Loss) is the US GAAP accounting standard for credit losses, set out in FASB ASC 326. Introduced through ASU 2016-13, it replaced the incurred loss model. It applies to SEC filers (excluding smaller reporting companies) for fiscal years beginning after 15 December 2019, and to all other entities for fiscal years beginning after 15 December 2022. CECL requires institutions to estimate lifetime expected credit losses using historical experience, current conditions and reasonable and supportable forecasts. Getting that right demands both rigorous economic forecasting and the credibility to stand behind it with auditors and regulators. Capital Economics provides independent, trusted insight to help you navigate these complexities with clarity and confidence.

Why does CECL need macroeconomic scenarios?

CECL requires reasonable and supportable forecasts of future economic conditions. Beyond the period an institution can forecast, it reverts to historical loss information. The standard doesn’t require multiple scenarios, but they can help institutions capture uncertainty and support their judgements with auditors and regulators. That is what we provide.

How we support CECL expected credit loss modelling

Our CECL macroeconomic scenario service combines a proprietary stress testing model, clear narratives and the expert judgement of our award-winning economists to deliver scenarios you can confidently use for both regulatory requirements and business planning. Our analysis and forecasts are independent, and we are a trusted provider of insights to the financial sector, with a strong track record of accuracy awards from organisations including LSEG, Consensus Economics and FocusEconomics.

Reasonable and supportable forecasts

CECL asks for reasonable and supportable forecasts. Every scenario path is fully documented, including how variables return to equilibrium over time.

Stress testing compatibility

Severities can be tailored to your requirements and calibrated to be broadly consistent with Federal Reserve stress testing benchmarks.

On your timetable

We update quarterly, and in real time during volatile periods, delivering to your reporting timetable rather than a fixed publication schedule.

Our scenario framework

What’s in our CECL scenario set?

Up to six scenarios, from a strong upside to an extreme downside, each anchored to a percentile of the distribution of plausible outcomes. The baseline is our modal forecast, the single most likely path. Use one scenario or several. If you weight them, we can recommend weights or you can apply your own. Prefer a different set? You choose the number of scenarios, their names and the severity of each.

Every scenario comes with national, 50-state and DC variable paths, a concise narrative and audit-ready documentation.

Geography	Coverage
National	100+ variables spanning output, the labour market, inflation, housing, commercial real estate, interest rates and financial markets.
50 states + DC	GDP, house prices and the unemployment rate, consistent with the national scenario.

Who it's for

Who uses our CECL scenarios?

US lenders

Banks, credit unions and other US lenders, including those with regionally concentrated portfolios, that need independent scenarios they can defend to auditors and regulators.

Dual reporters

Institutions reporting under both IFRS 9 and CECL can use one consistent set of scenarios for both standards.

Corporates and beyond

Our scenarios aren’t just for CECL. Corporates use them for business planning and stress-testing their strategy.

Methodology

How we build CECL scenarios

Our baseline forecasts are built on detailed analysis of economic data, historical context and evolving relationships within a robust analytical framework, rather than relying solely on large-scale econometric models. This approach allows us to clearly explain the drivers of our forecasts, including the impact of one-off events. Our economists combine statistical techniques with experience and expert judgement to derive the baseline, with senior economists regularly reviewing and challenging the outlook to identify new trends and reassess assumptions as conditions evolve.

01 Stress testing economic model

Our scenarios are produced using a proprietary stress testing model of the US economy, built in-house and underpinned by economic theory. Shocks propagate in line with expected economic relationships, keeping every scenario internally consistent.

02 Upside and downside scenarios

A suite of scenarios complements our baseline, spanning upside and downside outcomes across a range of severities. Each comes with a concise, jargon-free narrative and clearly defined assumptions, tailored to your portfolio.

03 National and state-level coverage

Our scenarios include GDP, house prices and the unemployment rate for all 50 states and DC, consistent with the national outlook, so institutions with regionally concentrated portfolios can use the outlook most relevant to their lending.

04 Expert judgement

The model provides the framework, but our economists’ judgement is central to every scenario, so each one tells a coherent, credible economic story rather than being a purely mechanical output.

The senior team behind your scenarios

Paul Ashworth

Chief Data & Modelling Economist

Paul Ashworth is the Chief Data & Modelling Economist at Capital Economics. He joined CE in 2001 from the National Institute of Economic and Social Research (NIESR), where he worked on developing their macroeconometric model of the world economy (NiGEM), after taking degrees in Economics and Mathematics at Strathclyde University (BSc) and Warwick University (MSc) and completing a PhD on asymmetric adjustment in macroeconomic models.

Alexandra Dreisin

Head of Modelling

Alexandra Dreisin is Head of Modelling at Capital Economics, where she leads the firm's quantitative modelling work, including the design and development of macroeconomic models for IFRS 9 and CECL scenario frameworks. Prior to this role, she spent over 10 years on the Consultancy team. Before joining Capital Economics in 2014, she was a research analyst at macro investment firm SLJ Macro Partners, and prior to that an economist at the US Bureau of Labor Statistics specialising in quantitative analysis and seasonal adjustment of the Consumer Price Index.

Stephen Brown

Chief North America Economist

Stephen Brown is our Chief North America Economist and has been with Capital Economics since 2014. He has worked from both our London and Toronto offices, covering the economies of the US, Canada and previously Europe. Stephen has won multiple awards for forecast accuracy from LSEG, FocusEconomics and Consensus Economics. He holds degrees from the University of Bath and the London School of Economics.

Grant Colquhoun

Chief Consultancy Economist

Grant is Chief Consultancy Economist and since joining Capital Economics in January 2018 has led due diligence, scenario planning and advocacy projects covering a range of countries. In previous roles he was Group Economist at a leading mining and metals consultancy, headed Oxford Economics sectoral forecasting service and held economist positions at HM Treasury and British Steel. Grant has extensive experience of the Chinese economy and in analysing and forecasting economic sectors internationally.

Why Capital Economics

Why choose Capital Economics for CECL scenarios?

Our modelling team partners with lenders to transform the complexities of CECL into clear, defensible and commercially robust solutions. The team is fully integrated with our award-winning Economics teams, whose internally produced baseline forecasts and ongoing peer review ensure that our CECL work is grounded in rigorous macroeconomic thinking. For many clients, our CECL scenario service is a natural extension of an existing CE relationship, bringing the same economist credibility and analytical rigour they already rely on directly into their credit risk process.

“We’re now fully integrating Capital Economics’ risk scores into our internal reporting for monthly collectability assessments under US GAAP and IFRS. We fully trust the quality of Capital Economics’ service and look forward to continuing and expanding our strategic partnership with the CE team.”

Global Credit Risk Data Solutions, Meta Platforms

capital-economics-cecl-scenario-modelling-brochure

The CECL guide

Download the CECL scenarios brochure

Navigating the complexities of CECL demands more than compliance – it requires a scenario framework that is robust, auditable and fit for the specific risk profile of your institution.

Our CECL scenarios are developed by our specialist modelling team, drawing on input from expert economists across Capital Economics. They are grounded in economic theory and sound statistical principles, aligned with regulatory expectations and designed to withstand scrutiny from auditors and supervisors alike. Our brochure sets out the full service, from scenario design and state-level coverage to what you receive at each reporting date.

Download the brochure Talk to our team

Explore CECL scenarios with our team

Tell us about your portfolio, models and reporting timetable, and our modelling team will be in touch.

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FAQ

CECL scenarios: your questions answered

: CECL (Current Expected Credit Loss) is the US GAAP standard for measuring credit losses, set out in FASB ASC 326. It requires lifetime expected credit losses to be recognised from the day a financial asset is originated or acquired.
: The incurred loss model recognised losses only once they were probable. CECL requires institutions to estimate lifetime expected losses upfront, using historical experience, current conditions and reasonable and supportable forecasts.
: All entities reporting under US GAAP with financial assets at amortised cost, including banks, savings associations, credit unions and holding companies. Corporates must also apply it, for example to trade receivables.
: For SEC filers excluding smaller reporting companies, fiscal years beginning after 15 December 2019. For all other entities, including credit unions, fiscal years beginning after 15 December 2022.
: ASC 326 doesn’t define it precisely. Forecasts should be objectively supported and updated in a timely manner, and the forecast period should reflect how far ahead an institution can make credible forecasts.
: No. But multiple scenarios can help capture uncertainty and support judgements. Our default framework offers up to six, and you can choose fewer.
: Both require expected credit losses. CECL, the US GAAP standard, requires lifetime losses from day one and doesn’t mandate multiple scenarios. IFRS 9 uses a three-stage model and explicitly requires probability-weighted outcomes.
: Yes. Our scenarios are fully consistent across national and state-level variables for all 50 states, so regionally concentrated portfolios can use the outlook most relevant to them.
: Yes. Our severe downside can be calibrated to be broadly comparable in severity to the Federal Reserve’s Severely Adverse CCAR scenario, and severities can be tailored to your requirements.
: Yes. For institutions that report under both standards, Capital Economics modelling scenarios can serve both at the same time.

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