In Brief

White Paper: Knowledge Graphs for Anti-Money Laundering and Transaction Monitoring

BY ROB CHANG, FI CONSULTING Today’s anti-money laundering (AML) and transaction monitoring systems need to be quicker and more agile to identify increasingly complex fraudulent transactions. Due to rapid evolution of fraudulent behavior, often layered behind seemingly innocuous transactions, AML models require greater sophistication to remain effective. Flexible approaches that utilize advanced computational techniques are......

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COVID-19 Impact on SBA Non-Essential Loans

BY SCOTT INOUYE and CASSANDRA LAFOREST, FI CONSULTING Government portfolio managers need to understand COVID-19’s impact on their investment programs. Two key factors for any business loan portfolio are its exposures to “non-essential” businesses and to COVID-19 infection rates within the lending footprint. SBA’s flagship 7(a) portfolio with FY2019 approvals of close to $24 billion......

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CECL Validation

Keys to CECL Validation Success in 2019

BY MARK JORDAN, FI CONSULTING At present, financial institution SEC filers are busy building and testing their internal models and processes to calculate reserves under the new current expected credit loss (CECL) accounting standard. The industry is entering a critical phase for teams to validate loss models and aggregate, analyze, and share preliminary results with......

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Modeling Severity Under CECL

BY BEN MURRELL, FI CONSULTING As many financial institutions enter into CECL parallel runs in 2019, they need to have a solid handle on their loss forecasting model inputs. To ensure compliance with the standard, regulators and auditors will be scrutinizing these inputs and assumptions, including severity, or loss given default (LGD). Regardless, whether a......

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Managing Profitability Under CECL Through Loan Pricing (Part 2)

BY BEN MURRELL, FI CONSULTING Part 2: Applying the Conceptual Loan Pricing Framework to CECL As organizations implement CECL, a key question is how CECL estimates should factor into loan origination and pricing decisions. In Part 1 of this series, we illustrated the mechanics of pricing with a hypothetical loan. In Part 2, we use......

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Managing Profitability Under CECL Through Loan Pricing (Part 1)

BY BEN MURRELL, FI CONSULTING Part 1: Defining a Conceptual Framework for Loan Pricing Background As organizations implement CECL, a key question is how CECL estimates should factor into loan origination and pricing decisions. Linkage is important because CECL will require that expected losses be reserved at time of origination. Correctly pricing in new reserves......

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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 painstaking focus on the fundamentals of building and defending your bank’s own view of its risk exposure. This requires bringing a disciplined and methodical approach to building the “case” for......

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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 credit loss (CECL) accounting standard. While the guidance does not explicitly mention the number of scenarios that should be used when measuring expected credit losses, financial institutions should consider a......

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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 over the contractual term of the financial asset or group of financial assets. However, this requirement is eased to allow entities to make or obtain “reasonable and supportable” forecasts of......

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Banks with Ontology and Knowledge Graph Capabilities well-positioned to meet…

FI Consulting’s Mark Jordan co-authored a blog with Element 22 discussing the importance of data governance and accessibility. Recent surveys find that many institutions are still in the planning stage for CECL, and that obtaining data necessary to support model development is among their most pressing tasks. In the recent past certain banks have met......

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