Research Conducted at Federal Reserve Bank of Philadelphia Has Updated Our Knowledge about CDC and FDA (Current Expected Credit Losses Implementation and Model Risk In Uncertain Times: an Application To Consumer Finance): CDC and FDA

2026 AUG 14 (NewsRx) -- By a News Reporter-Staff News Editor at CDC & FDA Daily -- Investigators publish new report on CDC and FDA. According to news reporting from Philadelphia, Pennsylvania, by NewsRx editors, the research stated, “We examine the challenges of economic forecasting and model misspecification errors faced by financial institutions implementing the Current Expected Credit Losses (CECL) allowance methodology and its impact on model risk and bias in CECL projections. We document the increased sensitivity to model and macroeconomic forecasting error of the CECL framework with respect to the incurred loss framework that it replaced.”

The news correspondents obtained a quote from the research from the Federal Reserve Bank of Philadelphia, “An empirical application illustrates how to leverage simple machine learning strategies and statistical principles in the design of a nimble and flexible CECL modeling framework. We show that, even in consumer loan portfolios with tens of millions of loans (eg, mortgage, auto or credit card portfolios), it is possible to develop, estimate and deploy an array of models quickly and efficiently, without a forecasting performance penalty. Drawing on more than 20 years of auto loans data and experience from the 2007-9 Great Recession and the 2020-21 Covid-19 pandemic, we leverage basic econometric principles to identify strategies to deal with biased model projections in times of high economic uncertainty.”

According to the news reporters, the research concluded: “We advocate for a focus on the resiliency and adaptability of models and model infrastructures to novel shocks and uncertain economic conditions.”

This research has been peer-reviewed.

For more information on this research see: Current Expected Credit Losses Implementation and Model Risk In Uncertain Times: an Application To Consumer Finance. Journal of Credit Risk, 2026;22(2):35-79. Journal of Credit Risk can be contacted at: Incisive Media, Haymarket House, 28-29 Haymarket, London, SW1Y 4RX, England.

Our news journalists report that additional information may be obtained by contacting Jose J. Canals-Cerda, Federal Reserve Bank of Philadelphia, 10 North Independence Mall West, Philadelphia, PA 19106, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.21314/JCR.2025.024. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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