CECL: Planning and Proofing

CECL: Current Expected Credit Loss model, a "loan lifetime expected loss" modelling requirement for banks, required by accounting standards from 2019

Most banks have the ability to run a very simple CECL analysis right now. The secret to CECL will be loan portfolio segmentation. If you get your segmentation right, you will find that it’s 80 percent of the battle. Mock calculations can then be performed on each segment.

The assumptions driving the model might not be 100 percent accurate, but at least this would give your bank a starting point to determine what additional data you need to improve such assumptions. Then, as you get more data, you run more mock calculations until you get it right. That would enable your bank to evolve its calculations by the time CECL is implemented.

The worst thing you can do is try to build a perfect system on Day One. That is what will lead to wasted money and time.

Invictus assists it bank clients in CECL preparation by assisting the bank to understand the loan-level information that will ultimately be required so the bank can start getting its data in order. Invictus will be introducing a CECL reporting capability for bank clients within the next few months.

Contact Invictus for further information.