Financial Institution

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. […]

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. […]