The June 2016 Financial Account Standards Board (FASB) issued ALLL/CECL model is due to take effect in 2020. All financial institutions are required to follow this new model – some starting in 2020 and the rest soon after.
The new requirements to use historical information, current conditions, forecasts, and macro market conditions for estimation, will no doubt put greater demands on the institutions’ credit and information technology teams to generate significantly more data, different or additional information details pertaining to the loans, and create new requirements for data modeling for forecasting and estimating losses.
The requirements on the data alone mandates that financial institutions start now with the identification of source data, data cleanup, and model variations based on one of the recommended approaches. Working with your credit risk team is the right place to start. Having a platform for data validation, cleanup, and loading with automated models is critical to the success of the program.
Cobblestone Management has been providing credit risk management services to community based financial institutions for over 25 years including loan reviews, stress tests, and credit underwriting support, among others. We have a consultative approach to support you with all your CECL transition activities – beginning with data management / review and through till final verification and validation of the model. With several banks already working with us, and with over 500 years combined experience of providing credit risk services to hundreds of community based financial institutions, we are confident we have the support structure to help you with your transition to be compliant with CECL guidelines.
If you have not started your journey on this CECL transition, Cobblestone can assist in the CECL implementation process by providing a turn key CECL solution tailored to your needs. Please reach out to Cobblestone Management today for a no-obligation discussion on your options. You may email us at firstname.lastname@example.org.