As we have heard from virtually everyone involved in the development of the new CECL model for estimating the allowance, the first thing a bank should do as it begins the transition from an incurred loss to an expected loss model is to assess its data. You will need substantially more and more types of data than you used for your incurred loss calculations.

Using the Loan Loss Analyzer as a Data Warehouse

But it’s not just about how much data you have, it’s about how to use that data to make judgments, assumptions, comparisons. That’s one way an automated system like the MST Loan Loss Analyzer (LLA) proves itself invaluable to a bank. The LLA is your data warehouse, containing all your loan data from all your data sources, your core plus other internal and external data sources. The LLA’s loan reporting function allows the bank to draw upon that data to compile information and conduct analyses it never before thought possible or so time-consuming to render it impractical.

Reports help to drive decision making

Over the years MST has developed more than 100 reports, many to address broadly shared needs, but many others to address an LLA user’s specific request for some type of analytical initiative. The LLA Loan Reporting portfolio today offers well in excess of 100 pre-defined reports to allow banks to perform all sorts of meaningful analyses. And there are an infinite number of client-defined reports that can be created.

Here are a few examples:

Impairment Comparison: The bank wanted to demonstrate how a specific group of loans changed in terms of their impairment over multiple periods. We developed a report that allows them to identify a certain population of loans as of a certain date, then compare their performance to that of a future period. The report identifies all loans that have moved into or out of impairment status.

Stress Test Grade Drop: A bank using the LLA Stress Test module wanted a way to accurately and easily identify loans that had dropped one or two grades during a stress test period. We developed a report that would allow them to look at grade drop percentages, so they could see how many loans had dropped to substandard or two categories over the stress test period. The analysis allowed them to identify a reasonable baseline for the percentage of loans that would drop during a particular stress period.

Loan Exceptions: We developed a series of reports that allowed the bank to identify loans that are not being treated in accordance with bank policy or loan data that falls outside the normal parameters for their loans.

Loss Emergence Periods: As banks began paying more attention to loss emergence periods as a way to track and predict loan losses, we developed reporting for determining loss emergence periods. The report considers the time from origination or downgrade of the loans to when the loss is charged off to determine average loss emergence periods for various types or categories of loans.

The Loan Loss Analyzer assures an efficient and accurate process to determine your allowance. The LLA Loan Reporting portfolio allows the bank to accomplish a variety of analyses that deliver critical insights into your loan portfolio as well as satisfy auditors’ and regulators’ appetites for supporting documentation.

Learn more about the MST Loan Loss Analyzer.