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Portfolio Risk & CECL

2016 Resolutions for CECL Preparation

Brandy Aycock
January 22, 2016
Read Time: 0 min

**Please check our most recent blog post regarding the latest changes to the FASB deadlines.**

 

To help you with the two to three years it will take to prepare for CECL, we’re publishing papers, hosting webinars and developing tools to help you identify the steps you will need to take and determine what and how long each will require. So how do you get started? What should you accomplish in 2016, this first year of CECL preparation?

1) Get Your House in Order

We suggest that you look at 2016 as the year to “get your house in order.” Auditors are telling their bank clients that manual spreadsheets will no longer be adequate for estimating the ALLL under CECL. So getting your house in order will involve getting your data and process in a manageable environment outside of Excel. That involves selecting a solutions partner, software, converting data, setting up interfaces, settling on workload and process flows, and building in the necessary checks and controls. That will give you a solid foundation, and a solid foundation will not only smooth the transition to the new accounting standard but facilitate your estimation process for the years before the transition.

2) Run Test Methodologies

Once you are confident about the integrity of your data and process, we suggest you begin sample CECL estimations using a prospective CECL model. A “shadow” loss analysis will help you determine which methodology will best suit your institution, its processes and controls. It will also help you determine the impact of CECL on your allowance, capital and other areas, so that you can begin to understand what other process modifications and planning you will need to do to accommodate CECL with the least disruption to bank operations.

Some of the possible methodologies include PD/ LGD or loss migration. In our blog 4 Methodologies to Consider Under CECL we explore different models.

 

For the most up-to-date information regarding CECL and the impending deadlines check out our most recent blog posts.

About the Author

Brandy Aycock

Brandy Aycock is Director of Event Marketing at Abrigo.

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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