TALES FROM THE FRONTLINE OF CECL IMPLEMENTATION – PART 2
LEARNING LESSONS FROM CECL IMPLEMENTATIONS INTRODUCTION More Lessons from the CECL front line In the last e-book, we collected the first set of articles based on our experiences of implementing CECL at smaller banks and credit unions. This e-book continues in that vein, with a greater focus on implementation choices made as part of those […]
TALES FROM THE FRONTLINE OF CECL IMPLEMENTATION – PART 1
LEARNING LESSONS FROM CECL IMPLEMENTATIONS INTRODUCTION CECL is now a reality for all banks and credit unions in the United States. Whether those institutions are designing, building, or testing ECL systems or deciding between competing third-party providers, the January 1 deadline looms large. Most accounting standards apply equally to banks and credit unions, both in […]
CECL – EXPERIENCES FROM IMPLEMENTATION FOR SMALLER BANKS AND CREDIT UNIONS
CECL IMPLEMENTATION AND ASSOCIATED CHALLENGES Implementing a new system and processes is never an easy task at any financial institution. to avoid disruption to ‘business as usual’, a rigorous approach must be taken. While this is true in all cases, CECL being implemented across the full spectrum of smaller ‘community’ banks and credit unions creates […]
PREPARING FOR PARALLEL RUNS
TIME FOR CECL PARALLEL RUNS Financial institutions across the U.S. have been planning for the Current Expected Credit Loss (CECL) accounting standard for several years now. There is a general agreement among financial circles that implementing the Financial The effective goal of a parallel run is to make sure that the institution is ready to […]
IDENTIFYING ISSUES – THE NEED TO STORE ALL DATA USED FOR ANALYSIS
HISTORICAL DATA AND CECL Most financial institutions have, by now, developed a Current Expected Credit Losses (CECL) implementation plan. If any institution is lacking a comprehensive historical data set, they need to start focusing on gathering data in order to use bottom-up historical loss data effectively in the future. Relevant historical loss data helps The […]
IDENTIFYING ISSUES – LOAN LEVEL ANALYSIS
LOAN LEVEL ANALYSIS AND CECL AUDITING Following the global financial crisis of 2007–09, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016–13, also known as Current Expected Credit Loss (CECL). Using CECL, banks can proactively react to actual and anticipated changes in the credit environment by detecting expected credit losses early. The social […]
IDENTIFYING ISSUES – HISTORIC COMPARISONS BETWEEN REPORTING PERIODS
CECL IMPLEMENTATION In June 2016, the Financial Accounting Standards Board (FASB) issued the Current Expected Credit Losses (CECL) accounting standard. CECL focuses on estimating expected losses over the life of the loan. CECL’s effective date has been rescheduled from January 2022 to January 2023 for non-public companies, and from January 2021 to January 2023 for […]
OPTIMIZATION AND RISK APPETITES – VOLATILITY VS ABSOLUTE COST
CECL OPTIMIZATION AND ABSOLUTE COST The Current Expected Credit Loss (CECL) accounting standard, which was issued by the Financial Accounting Standards Board (FASB), provides for more timely recognition of credit losses. One of the key aspects of CECL is to select the right methodology to estimate the Expected Credit Losses (ECL) so that institutions can […]
AUDIT READINESS 2 – LAYING THE INFORMATION OUT TO HELP THE AUDITOR
CECL AND AUDIT READINESS The Financial Accounting Standards Board (FASB) issued the credit loss accounting standard, the Current Expected Credit Losses (CECL), in June 2016. CECL focuses on expected credit losses over the life cycle of a loan and also on the reserves an institution is supposed to maintain to cover those losses. This is […]
THE RELATIONSHIP BETWEEN DCF, PD/LGD AND LOAN PRICING
DISCOUNTED CASH FLOW (DCF) METHOD AND ITS RELEVANCE TO CECL Notwithstanding the 2023 effective date, financial institutions are already working to have systems and procedures in place to implement the Current Expected Credit Losses (CECL) standard. Developing a technique for calculating the allowance for expected credit losses is one of the most important aspects of […]
