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. […]

Excel Not Designed for “Heavy Lifting”

Increasingly banks and credit unions that have relied on Excel spreadsheets to determine their allowances are finding the software unsuitable for estimating under the new CECL accounting standard. As they work their way through the CECL transition period, all but the smallest, most vertically oriented institutions are realizing that there is simply too much data and too much complexity to estimating under CECL to make using Excel viable.  […]

2018-10-24T13:55:33+00:00December 1st, 2017|Excel, Excel for CECL|

Erroneous Excel: Part III

Dalton T. Sirmans, MST In Part I, we touched on some Excel plusses and minuses, its usefulness and the associated risks. In Part II, we learned why, despite its faults, so many banks continue to rely on Excel for their most critical calculations. It is clear that the financial industry, business people in general, educators and students are not about to ditch the electronic spreadsheet – no matter the evidence of error rates. So how do we improve the accuracy of Excel results? Our option is one of three: testing, parallel systems and automation. […]

2018-10-23T12:53:54+00:00March 23rd, 2015|Excel, Excel for CECL|

Erroneous Excel: Part II

Dalton T. Sirmans, MST In Part I, we touched on some Excel plusses and minuses, its usefulness and the associated risks. How would management react to a lender who makes a loan based on data and documentation that has an 88 percent probability of containing one or more errors? What criticism would result from internal and external auditors? How would regulators react? As stated in “Erroneous Excel: Part I,” numerous studies over the past ten years have uncovered errors in spreadsheets used every day to manage trillions of dollars. Fact finders have determined that nearly nine of ten spreadsheets (88 percent to be exact) contain errors. Still, the vast majority of financial institutions employ Excel as the tool of choice for calculations, estimations and overall financial management. Eighty-four percent of respondents to the “2014 McGladrey Loan Loss Reserve Survey” reported using Excel-based models to estimate their Allowance for Loan and Lease Losses (ALLL). Considering the ALLL is a bank’s most important quarterly calculation, the preponderance of banks using error-prone Excel in their calculations is befuddling if not alarming. […]

2018-10-23T12:53:54+00:00March 9th, 2015|Excel, Excel for CECL|

Erroneous Excel: Part I

Dalton T. Sirmans, MST MST is in the business of convincing bankers to replace Excel spreadsheets with software designed specifically for estimating their ALLL and by extension, managing loan portfolio risk. But what’s wrong with Excel? By making it easy for almost anyone to do the kind of number crunching once reserved for accountants, it has achieved status as, some statisticians suggest, the most used business program ever. “Microsoft Excel is one of the greatest, most powerful, most important software applications of all time,” writes James Kwak for The Baseline Scenario. “It provides enormous capacity to do quantitative analysis, letting you do anything from statistical analyses of databases with hundreds of thousands of records to complex estimation tools with user-friendly front ends. And unlike traditional statistical programs, it provides an intuitive interface that lets you see what happens to the data as you manipulate them.” Stuart Leung of Salesforce adds: “Spreadsheet software provides an easy-to-use data entry platform for students and professionals, particularly in the marketing, sales, business, and finance fields.” Still, for all its usefulness, Excel presents problems to bankers, in particular, when it is used for the most critical quarterly calculation, the ALLL. […]

2018-10-23T12:53:54+00:00February 23rd, 2015|Excel, Excel for CECL|