EBook: 3 Tips for a Winning CECL Strategy
EBook: 3 Tips for a Winning CECL Strategy
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 , which leads many to speculate about the best way to implement it. At its core, CECL is a simple idea 鈥 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 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 . 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 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鈥檚 recipe for success, including data availability, model methodologies and economic scenarios.
Say 鈥Yes鈥 with Confidence
Developing your CECL strategy can be overwhelming, but the good news is we鈥檝e got you covered. We鈥檒l help you devise a plan of action that empowers you to answer the question, 鈥淒o you have a winning CECL strategy?鈥 with a decisive 鈥測es.鈥 For more information, download our ebook.