Watch how Experian can empower you with the right data and the right reserve levels at the right time.
CECL, or current expected credit loss, is a new accounting standard that estimates expected credit losses by using historical information, current conditions and reasonable forecasts. CECL compliance is critical as it’s considered one of the most significant accounting changes in decades to affect entities that borrow and lend money.
Our CECL solution, the Ascend CECL Forecaster™, delivers compliance in a click. Built with lenders of all sizes in mind, it includes the data you need for required historic modeling, consulting for modeling expertise and loan loss calculation. And on top of it all, it’s easy to use, easy to read and easy to report — making compliance a breeze.
With required reserves anticipated to increase due to the new CECL standard, every percentage point matters. That’s why Experian serves as your trusted advisor and can perform a gap analysis to update your current strategies.
Plus, we’ve collaborated with Oliver Wyman to create the Ascend CECL Forecaster. This powerful combination of Oliver Wyman’s analytics and Experian Ascend Technology Platform™ will help you comply with CECL and understand the impact to your business. Additionally, you can leverage these findings to improve overall profitability and maximize the dollars available to you to reinvest into growing your organization.
Additionally, Experian can help with your data needs. Data quality is a foundational first step in CECL modeling so your business can trust that accurate, relevant and complete data helps you precisely estimate and measure credit losses for loans and debt securities. We can help you elevate your current data landscape and determine what you need to do to clean it up and build a sustainable data quality and data governance strategy.
Watch the demo video to see how you can be CECL compliant in a click.
We’ve combined Oliver Wyman’s analytics and Experian Ascend Technology Platform to help you comply with CECL.
Built with lenders of all sizes in mind, it includes the data you need for required historic modeling, consulting for modeling expertise and loan loss calculation.
It’s easy to use, easy to read and easy to report. Maximize the dollars available to you to reinvest into your growing organization.
We include both consumer and commercial data for custom analytics to support CECL compliance.
The CECL model is the new Financial Accounting Standards Board (FASB) standard for estimating and measuring credit losses for loans and debt securities. CECL is a change from the current incurred-loss model and brings with it significantly greater data requirements, including historical data for the life of the loan.
Preparing for and implementing CECL will compel financial institutions to think about credit risk in new and more timely ways and to either recalibrate existing models or develop new ones. Critical components to manage during CECL implementation include data preparation, loan segmentation, methodologies selection and process validation.
CECL has different effective dates based on the type of reporting entity. Public business entities that file financial statements with the Security and Exchange Commission will have to comply by 2020, and smaller publicly traded banks (defined by the SEC as smaller reporting companies), as well as privately held banks and credit unions, must adopt the new standard by 2023.
CECL replaces the current allowance for loan and lease losses (ALLL) accounting standard. Under CECL, entities are required to account for expected losses over the estimated life of the loan, while the existing model relies on incurred losses.
The FASB has high hopes for CECL, stating that the new standard will improve “financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations."
Complying with CECL may require you to gather, store and calculate more data than before. To satisfy CECL requirements, financial institutions will need to focus on end-to-end management, determine estimation approaches that will produce reasonable and supportable forecasts and automate their technology and platforms. Additionally, well-documented CECL estimations will require integrated workflows and incremental governance.
You won’t be able to reach full compliance without complete, clean, accurate data encompassed in a model that fits both CECL and your specifications. Investing in quality data establishes a foundation for your modeling you can trust.
What should organizations look for in a partner that assists in measuring expected credit losses under CECL?
It’s expected that many financial institutions will use third-party vendors to help them implement CECL. Third-party solutions can help institutions prepare for the organization and operation implications by developing an effective data strategy plan and quantifying the impact of various forecasted conditions. The right third-party partner will deliver an integrated framework that empowers clients to optimize their data, enhance their modeling expertise and ensure policies and procedures supporting model governance are regulatory compliant.
What’s CECL’s impact on financial institutions? How does the impact for credit unions/small lenders differ (if at all)?
CECL will have a significant effect on financial institutions’ accounting, modeling and forecasting. It also heavily impacts their allowance for credit losses and financial statements. Financial institutions must educate their investors and shareholders about how CECL-driven disclosure and reporting changes could potentially alter their bottom line. CECL’s requirements entail data that most credit unions and smaller lenders haven’t been actively storing and saving, leaving them with historical data that may not have been recorded or will be inaccessible when it’s needed for a CECL calculation.
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