New loan-accounting rules may be arcane, but investors are learning fast. Starting this year, big U.S. lenders must set aside reserves for the expected lifetime losses of a loan, not just losses expected over the next year. The new standard—called the current expected credit loss method, or CECL—doesn’t change a loan’s ultimate cash flows over time and so shouldn’t, in theory, change a long-term investor’s view on a lender. Yet in practice, there is some stock volatility as the transition plays out.

Source: Wall Street Journal January 25, 2020 15:00 UTC