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.
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.
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.
At banking organizations, financial model validations can be simply viewed as a necessary task on a checklist for following regulatory guidance. Some institutions also believe that the quality of a model validation is less important when the institution or business line is successful and when local, regional and national economies are all thriving.
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?