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CECL

Don’t let your CECL road map turn into a CECL roadblock

Don’t let your CECL road map turn into a CECL roadblock

Jeff Prelle, Head of Risk Modeling at MountainView, a Situs company, served as conference chair at the CECL 2018 Congress Conference.

When it comes to Current Expected Credit Loss (CECL) planning, modeling and implementation, the consensus among financial institutions is that there is no consensus, because no two financial institutions are alike. At Situs, we often reinforce the importance of taking a strategic approach to CECL modeling and implementation. After all, CECL’s tentacles touch a wide range of functions within a financial institution, from model and credit risk to accounting and information technology (IT). But when it comes to achieving CECL milestones and tactics, what will work for one bank, credit union or lender may not work for another.

What’s really at stake with your institution’s CECL data?

What’s really at stake with your institution’s CECL data?

Since the Current Expected Credit Loss (CECL) standards were finalized in June 2016, one major area of concern among bank and credit union CECL teams and their CFOs has been that the new set of loan loss calculations will require extremely granular and high-quality data.

The CECL paradox and its impact on financial comparability

The CECL paradox and its impact on financial comparability

The Financial Accounting Standards Board (FASB) did not prescribe a specific approach when it required the Current Expect Credit Loss (CECL) standard, leaving it up to financial institutions to determine the best path forward. Since Allowance for Loan and Lease Losses (ALLL) is no longer an apples-to-apples comparison, how will this impact a financial institution’s ability to compare itself to its peers?

What financial modelers can learn from MoviePass when implementing CECL

What financial modelers can learn from MoviePass when implementing CECL

If you have followed the news about MoviePass and its recent financial downfall, you may have read about declining stock prices and angry customers, and made a mental note about what not to do in business. However, there is one critical but less obvious lesson to learn from the MoviePass pandemonium – and it is one that just might keep your financial institution from going down the wrong CECL road.

5 overlooked risks to watch in financial services

5 overlooked risks to watch in financial services

Yes, we all know cyber security is the top risk facing banks and companies across all industries. However, as financial industry leaders scramble to address cyber risk and security, other banking risk could easily fall under the radar. When assessing business risk in the coming quarter and heading into 2019, keep these sneaky culprits in mind:

What five key activities should credit unions be doing today in their CECL projects?

What five key activities should credit unions be doing today in their CECL projects?

If credit unions want to stay on track for implementing the Current Expected Credit Loss (CECL) standard, they need to have already completed several milestone tasks and to complete several more by the end of the year. Credit unions also need to be sure they have allocated sufficient time to complete the tasks that need to be finished between 2019 and 2022.

CECL methodology will become part of bank M&A due diligence by mid-2019

CECL methodology will become part of bank M&A due diligence by mid-2019

After many quiet years, merger and acquisition (M&A) activity at banks has been on the rise in 2018, and several favorable trends will likely sustain the momentum through the remainder of the year. By the middle of 2019, as banks evaluate acquisition opportunities, they likely will add a new component to their customary due diligence: an exploration and understanding of the target company’s Current Expected Credit Loss (CECL) methodology.

Webinar will give credit unions information they can act on for CECL preparations

Webinar will give credit unions information they can act on for CECL preparations

Where are credit unions at in their preparation for implementing the Current Expected Credit Loss (CECL) standard? What are the biggest challenges they’re facing? What insights and best practices can they glean and apply from the work their peers have done so far?

CECL model validation: data and documentation to play an important role

CECL model validation: data and documentation to play an important role

While financial institutions are still in the early phases of current expected credit losses (CECL) planning, implementation and monitoring, others have already selected and simulated their model or model software and are ready for the next phase of the process: model validation.

CECL's credit box curveball

CECL's credit box curveball

With the Fed raising rates and long-term rates stabilizing, the yield curve is flattening, leaving financial institutions in a more vulnerable position. To offset the cost of funds and increase profit margins, many banks and credit unions are looking for ways to grab more market share, increase returns and appeal to a wider audience. Some lenders are taking on more risk by expanding credit boxes (appealing to under-served or complex borrowers) and loosening underwriting standards. With the ongoing rush to create and implement CECL models, how would expanding credit boxes impact your credit loss estimates?

CRE and C&I loans are top CECL data issues for banks

CRE and C&I loans are top CECL data issues for banks

It’s common for a bank of any size to have both commercial real estate (CRE) loans and construction and industrial (C&I) loans on its balance sheet. Another commonality: most small, midsize and large banks currently don’t have sufficient data to conduct an estimated loss analysis on these assets for the new Current Expected Credit Loss (CECL) standard, which goes into effect for publicly owned institutions in 2020.

CECL analyst: If you want to pass a CECL audit, be sure to show your work

CECL analyst: If you want to pass a CECL audit, be sure to show your work

Newswatch recently talked with Atul Nepal, a Quantitative Analyst at MountainView Financial Solutions, a Situs company, about the impact of the current expected credit losses (CECL) standard, which was issued in 2016 and will begin to go into effect in 2020.

(1) What is the best model to use for small financial institutions? What about larger institutions?

Community bank CECL: 3 external drivers that may strengthen your model

Community bank CECL: 3 external drivers that may strengthen your model

As community banks continue to evaluate their data and develop and test methodologies for CECL modeling, some might not have enough data within their existing loan portfolios. To more effectively estimate forward-looking losses, community institutions should apply external key data elements (KDE) to help obtain the results required to satisfy their need for “reasonable and supportable forecasts.”

Capitalizing on CECL for a strategic competitive advantage

Capitalizing on CECL for a strategic competitive advantage

What is your strategy for implementing CECL? That’s a question an increasing number of financial institutions are being forced to ask and answer. No longer just impacting accounting and finance, the tentacles of FASB’s CECL standard have made their way to organizations’ model risk, credit risk and information technology (IT) groups. If CECL is touching various aspects of an organization, is it feasible for financial institutions to view it myopically, as an accounting issue alone?