Current Expected Credit Loss (CECL)


In 2016, FASB introduced Accounting Standards Update (ASU) No. 2016-13 Financial Instruments – Credit Losses (Topic 326) that shifts the basis of the loss allowance accounting framework from incurred credit losses to Current Expected Credit Loss (CECL). This transition to CECL will impact institutions’ financial results and have major implications on data, modeling, and analytics requirements. Further, it will result in a fundamental re-evaluation of portfolio composition and business strategy.

FI has deep experience helping financial institutions assess, develop, and enhance their loss reserve processes end-to-end. We have helped commercial institutions establish incurred loss approaches and are the leading provider of expected credit loss modeling and analytical support to the federal government. FI sources and validates data, builds models, develops supporting analytics and documentation, and interfaces with internal stakeholders and auditors. We help our clients develop reserve estimates that are explainable, reflective of portfolio characteristics and the economy, and well-controlled. Our loss reserve experience spans numerous asset classes and we’ve worked through all phases of the economic cycle.

 

How we Help

Models

  • Stress model conversion
  • Documentation
  • Testing and validation
  • Economic forecast scenario development
  • Segment-level bespoke model development (open/closed pool, vintage migration, PD/LGD, DCF)

Data

  • Architecture Design
  • ETL
  • Quality Testing
  • Controls
  • Inventory Assessment for quality and completeness

Technology

  • Requirements and system analysis
  • Architecture design
  • Platform selection and integration
  • Application rationalization (TCO analysis, application rightsizing, business value evaluation)

Organization

  • Audit trail development
  • Integrated project management
  • Business integration (cost/benefit analysis, pricing and costing impact analysis, customer analysis)

 

Featured Case Study

FI Provides Insight into a Large Financial Institution’s Distressed Asset Valuations

FI creates highly efficient processes that renewed confidence in the large financial institution’s NPL, RPL, and REO valuations; Client: Large financial institution…

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Thought Leadership

White Paper: Four Pitfalls to Avoid During CECL Implementation

BY MARK JORDAN, FI CONSULTING Building a durable, defensible Current Expected Credit Loss (CECL) process that reflects your organization’s view of its credit risk requires...

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A Framework for Multiple Economic Scenarios Under CECL

BY ROBERT CHANG AND MARK JORDAN, FI CONSULTING Background We present a pragmatic approach to generating multiple economic scenarios for the new FASB current expected...

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Four Key Questions When Estimating Current Expected Credit Losses (CECL)

BY ROBERT CHANG AND MARK JORDAN, FI CONSULTING Under the FASB current expected credit loss (CECL) accounting standard, public entities are required to estimate losses...

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WHITE PAPER: Current Expected Credit Loss (CECL)

Lessons from the Federal Government Experience with Lifetime Expected Credit Loss Federal loan programs that oversee loan and loan guarantee portfolios — such as the...

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Webinar: Successfully Transition to the New CECL Standard: Insights and…

Most U.S. financial institutions must be prepared to implement FASB’s new current expected credit loss model (CECL) by the end of 2019. As institutions plan...

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