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......
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......
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......
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......
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......
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......
Take An Integrated View of Mission, Cost, and Risk in…
BY JOSH MEIKRANTZ, FI CONSULTING Introduction Federal credit agencies expend resources—in the form of costs and risk— in order to achieve policy missions. While agencies measure program credit costs and performance against mission, typically these efforts are undertaken independently and risk is not considered at all. Government credit agencies should assess costs, mission, and risk......
Webinar: Building a Model UI with R, Spark, and AWS
Rescheduled: Due to unforeseen circumstances, this webinar will be postponed until Tuesday, January 23, 2018 at 12 p.m. (ET) In many organizations, models are run from someone’s desktop, key assumptions are hard-coded, and sensitivity to the inputs is not always clear to users of the model. Using R, Spark, and AWS, we’ll demonstrate how you......
Webinar: Demystifying Complex Models Using Open-Source Software and the Cloud
Rescheduled: Due to unforeseen circumstances, this webinar will be postponed until Tuesday, January 23, 2018 at 12 p.m. (ET) In many organizations, models are run from someone’s desktop, key assumptions are hard-coded, and sensitivity to the inputs is not always clear to users of the model. Using open source statistical software, we will demonstrate how......
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 their transition from incurred loss to CECL, they are assessing their existing data and modeling assets, consulting with their auditors and regulators, and reflecting on lessons learned from implementing CCAR......