Credit Risk

EBook: 3 Tips for a Winning CECL Strategy

EBook: 3 Tips for a Winning CECL Strategy

February 12, 2019 | Flor Santiesteban

Many financial institutions are still evaluating their Current Expected Credit Loss (CECL) implementation strategy. With implementation deadlines looming, organizations are still grappling with data gaps, building models and governance processes. However, that's not surprising given that CECL has been labeled the biggest change ever to bank accounting. To help you nail down that winning CECL strategy, here are three tips from our ebook, "Develop a Winning CECL Strategy: 3 Tips for Success."

Tip #1: Get to Know CECL

Experts have written a lot about CECL, which leads many to speculate about the best way to implement it. At its core, CECL is a simple idea – lenders will now have to forecast expected losses, rather than incurred losses. Lenders no longer have to wait for credit performance to have indicators of distress to make projections of credit losses. Estimates must now account for historical experience, current conditions and reasonable, supportable forecasts. CECL has the potential to arm stakeholders with better information and strengthen financial reporting. Additionally, CECL could impact lending decisions and have consequences on the cost and availability of credit.

Tip #2: Data is King

Secondly, a significant concern in complying with CECL is the availability and quality of data. Estimating CECL will require more historical data than required by an incurred loss method. Additionally, transitioning to an expected losses approach can be uncharted territory for many financial organizations. This is especially true for smaller banks and credit unions that may lack the data and internal expertise to forecast losses that way.

Tip #3: Have a Game Plan

Lastly, the goal of CECL may seem logical and simple. However, putting it into practice and achieving a smooth implementation may prove to be much more complex. Developing a game plan with achievable milestones will likely go a long way in easing some of that complexity. While financial institutions may have discretion in determining how best to estimate losses, there are some critical factors in a lender’s recipe for success, including data availability, model methodologies and economic scenarios.

Say Yes with Confidence

Developing your CECL strategy can be overwhelming, but the good news is we’ve got you covered. We’ll help you devise a plan of action that empowers you to answer the question, “Do you have a winning CECL strategy?” with a decisive “yes.” For more information, download our ebook or watch our on-demand webinar, CECL: Putting the Puzzle Together.

Flor Santiesteban

Flor Santiesteban

Product Marketing Manager

Flor leads marketing strategy and execution for the Banking & Lending vertical at Equifax. In this role, she is responsible for developing and implementing integrated marketing campaigns, including thought leadership, sales enablement and demand generation. For more than 20 years, Flor has focused on the financial ser[...]