Current Expected Credit Loss

CECL Methodologies for Small Institutions: Agencies Make Recommendations

On February 27, representatives of several regulatory agencies, including the FDIC, FASB and the SEC, hosted a webinar to offer sample CECL methodologies considered appropriate for “smaller, less complex” financial institutions. The speakers referenced three methodologies: snapshot or open pool method, remaining life method and vintage method.  […]

2018-10-30T16:02:51+00:00July 13th, 2018|CECL, Current Expected Credit Loss|

Five Things to Remember in Your Transition to CECL

Our 2018 blogs have focused on providing information relevant to your transition to CECL. In looking back over the year’s blogs to date, we revisit five things to remember in your transition to CECL. 1) There is typically no better place to start in preparing for CECL than your incurred loss methodology of today. […]

Confessions of a Data Analyst

The implementation of CECL has been called the biggest change in financial institution accounting . . . ever. Under current U.S. GAAP, financial institutions account for losses based on historical events or incurred losses. Beginning in the first quarter of 2020, financial institutions must look at the past as well as the future over the full lifetime of a loan. […]

Your CECL Committee: Who’s Invited?

For financial institutions, the path to CECL compliance starts with establishing a CECL committee, whose job it is to guide the institution through the process of transition to estimating their allowance in compliance with the new Current Expected Credit Losses accounting standard. Broad committee representation is recommended because CECL will require input from more departments of the institution – that is, more people and positions will participate, at some level, in the CECL allowance process. […]

Looking into the Shadows for CECL Clarity: Shadow Loss Analysis

On April 17, Chris Emery, MST senior advisor – engineering and director of special projects, walked webinar attendees through a discussion of testing and experimenting with potential CECL methodologies and the Shadow Loss Analysis feature of the Loan Loss Analyzer allowance automation software that streamlines the process. Following are some of the highlights of Chris’s presentation. […]

It’s crunch time.

SEC filers will start estimating their allowances according to CECL as of the first quarter of 2020, just a little more than a year and a half from now. Considering they will want to run parallel incurred loss and CECL methodologies for several quarters – a year is recommended – most lenders, including private companies, are knee-deep in preparations, setting up transition committees, gathering data, studying methodologies. […]

What are the significant changes in disclosures under CECL?

Continuing our series of questions asked of MST Senior Advisors Paula S. King, Garry Rank, and Dorsey Baskin during the March 13, 2018 webinar “Key Issues and Trends in CECL Transition: A Panel Q & A Webinar”, the panel of allowance experts offers insights into some of the significant changes in disclosures under CECL. […]

CECL and the Board: New Standards Bring New Responsibilities

One of the MST series of articles on the impact of CECL on institution’s top managementA core responsibility of a financial institution’s board, often in conjunction with its audit committee, is oversight of financial reporting. Given recent and ongoing revisions to major financial reporting standards, the board’s workload relative to financial reporting has significantly increased. […]

Economic Forecasting

Economic forecasting will be an important part of predicting future losses under CECL. At the 2015 National ALLL Conference in the session entitled “Transitioning to CECL”, Graham Dyer of  Grant Thornton proposed three steps to developing a “reasonable and supportable” forecast: Identify the relevant economic metrics that drive losses for different segments of loans, which must be supported by documentation of not just the metrics selected but of other metrics considered but not selected. Identify economic forecasts for the selected metrics. Documentation must include reasons a specific forecast was chosen and other metrics considered but not selected. Translate to loss information using correlations and lags identified in historical data. […]