The Current Expected Credit Loss (CECL) model changes 40 years of standards related to accounting for credit risk changes. The impact will vary, but every credit union is required to comply with the standards.
The Time to Start Is Now
The new standard will affect credit unions of all asset sizes and many have begun preparations. They are taking advantage of the opportunities gained from data-driven insights about their members and making the necessary improvements to upgrade the quality of their loan portfolios.
Better Data Makes for Better Loans
Credit unions are always trying to serve their members better. One way to do this is to expand loan offerings into new niches and new products. The methods available to help institutions comply with CECL rules offer a variety of additional insights into the possible future performance of loans while still supporting the prudent risk management strategies that executives, boards and regulators expect.
Generating a Return on Your CECL Investment
It’s no secret that CECL models and software solutions cost significant amounts of time and money to implement. That’s due in part to the considerable increase in the amount of data your new system will track and evaluate. The key to making your CECL investment work for your credit union is a careful analysis of the ALLL calculation methods available and the additional information they can provide to help evaluate loans. The success of the system you implement will be measured by the improvements in your credit union’s capacity to control pricing, perform credit analysis and conduct strategic planning.
HORNE offers a consulting-led approach to evaluating and implementing models and software that takes into account the critical data points your credit union needs to improve its performance. We help you assess the data you currently collect, any additional data you may need for CECL compliance and data collection that goes beyond CECL compliance to make your credit union more successful in its lending practices.
Even if your plan for CECL compliance is to modify existing systems and methods, you will still need to clarify your loan portfolio and credit quality indicators, select appropriate CECL model(s) for each loan pool, and evaluate your software and CECL models for sufficiency. HORNE has the resources to get you up to speed with the new requirements quickly and efficiently.
Compliance Is More Than a Requirement. It’s an Opportunity.
Once solutions are in place, HORNE provides ongoing support to help your credit union respond to regulators’ questions with confidence. We also work with you to ensure that member, lending product and credit quality data continue to improve in order to support the performance of your loan portfolio and mitigate risk.
Take CECL from compliance challenge to opportunity. Wherever you are in the process, HORNE will take you forward.