Current Expected Credit Loss (CECL) Model
Timely preparation paired with expert support lead to CECL success
Lending Insights understands the importance of staying ahead and on top of the new Current Expected Credit Losses (CECL) standard. With its anticipated release finally here, Lending Insights’ comprehensive services and knowledgeable team of experts are equipped to help credit unions proactively prepare, strategically plan, and efficiently implement the new standard for calculating and forecasting Life of Loan losses.
How to Prepare for CECL?
It can be challenging, perhaps even daunting to think about CECL preparation. The following four items should be considered for successful CECL preparation:
- Locate and Collect the Data: Key loan data may be stored in disparate locations throughout the credit union’s organization. Locating the pertinent data and storing that data in one centralized location will be critical.
- Data Cleansing: It will also be critical to ensure the data is complete and accurate. Data validation measures should be put in place to ensure good data is used in the allowance analysis
- Evaluate Models: The FASB CECL guidance is not prescriptive in the methodologies to use for the reserve calculation. It will be important to select the approach and methodology that is best suited for the credit union’s circumstances.
- Validate: Auditors and examiners will expect credit unions to be able to document, validate, defend and support their reserve levels. It will be vital that proper validation has been applied to the model and its outputs.
Lending Insights’ Compliance Reports
In an effort to help credit unions with CECL preparation, Lending Insights offers CECL compliance reports to clients. These reports contain thorough and well-detailed insights such as: default probabilities based on multi-variant linear regression analysis.