Current Expected Credit Loss (CECL) is a new standard of measuring expected credit losses by financial institutions. CECL is expected to bring significant changes in the way financial institutions handle market and credit risks. Lending institutions will now shift their allowance for loan and lease losses from the estimation of incurred portfolio losses based on past performance to a projection of losses based on reliable forecasts on economic conditions that affect their particular portfolios.
Recently, the Financial Accounting Standards Board (FASB) indicated that it would issue guidance to clarify the implementation dates of its current expected credit losses (CECL) standard. While this standard goes into effect for credit unions fiscal years beginning after Dec. 15, 2021, the guidance would clarify that they would not need to begin reporting data on losses on call reports until the beginning of 2022.
For proper implementation of CECL, here are some of the solution providers that are available to help financial institutions:
1. Deep Future Analytics
This is a solution provider that will give your financial business the advanced predictive solution it needs for CECL implementation. The company utilizes the latest technology in designing techniques that help financial institution obtain tangible business benefits from their CECL investment. Deep Future Analytics offers a full software suite whose functionalities include enhanced credit risk forecasting, granular forecasts for each account for each remaining month of the loan, outputs on the account level and output on portfolio level, quantification of the drivers of period-to-period change and estimates of future CECL reserves for budgeting given new origination plans.
DFA’s CECL solution integrates with their analytics platform providing portfolio optimization, price optimization, modeling monitoring, and early warning all from the same models. The models can leverage DFA’s shared data pool covering all product types or be custom developments for larger clients.
The all-inclusive CECL solution offered by Deep Future Analytics is what a financial institution needs to meet future regulatory compliance needs as well as CECL accounting expectations. This provides educational guidance as well as offer consultation services before your business’ CECL implementation date.
Visible Equity provides comprehensive data warehousing, analytics, and software for all facets of CECL, including custom segmenting, individual review capabilities, a variety of CECL-compliant loss methods (static pool, vintage, probability of default, discounted cash flow, etc.), standard and customizable Q&E adjustments, forecasts and forecast adjustments, and a complete reporting suite.
Their software also makes it easy to compare the results from different methods and they have a dedicated support team to help you make a successful transition to CECL.
FICO claims to help you simplify and speed up CECL implementation. The company, first of all, helps you to come up with goals you intend to achieve with CECL, then help you change from the older accounting standards to the new and most reliable one. This way, you will be able to enjoy the results you anticipated in new conditions. FICO’s experience in helping financial institutions around the world in the implementation of IFRS 9 is what makes it unique.
The company will help your business solve its most prominent and most complex problems to increase its value in the industry. With its help, financial institutions can drive quick, smart and consistent business decisions that will save time and reduce business expenses. With FICO’s Express Insight solution, any lender should have the power of optimization in their hands.
4. Moody’s Analytics
This is a company that is well prepared to help any financial service provider with proper implementation of CECL and other accounting standards that are still to come. The company has everything in place to provide advisory services, data, models and economic forecast solutions as well as automate the processes involved in making sure that all its clients are compliant with the new standards quickly and efficiently.
Moody’s Analytics has advisory and implementation teams that will work with your firm to access, enhance and implement allowance estimation frameworks to help you comply with CECL standard. Through the use of industry-leading CECL models, the company can help its clients access and manage expected credit loss under the new accounting standard.
There are plenty of automation tools available here as well, that feature reliable, repeatable and auditable loss analysis and process management. These will decrease any operational difficulties any financial institution might face with the use of CECL standard.
An important thing for financial institutions to transition easily to CECL is in having enough data of the best quality. This is a problem that MST is here to solve for your business. This is a company that has been working with lenders for some time, helping them bridge any data gap they might have and trying to cover those gaps. The company’s main role is to identify important data points for its clients’ chosen CECL methodologies, then capturing those data types and safeguarding them.
With the help of this solution provider, you will never have to worry about gathering the necessary data for CECL. You will have enough quality data in your archive for proper transitioning to the new accounting standards by the time your date of implementation is here. It will help to work with a partner who understands the type of data you should collect for your CECL implementation and how much of that data will be needed.
Oracle is here to offer one of the vital solutions that will help your financial institution stay in compliance with CECL standards, which is flexibility. Lenders should be flexible enough to quickly adapt to CECL’s continuous changing ideas and regulations. The solution provider has ready to implement solutions that will keep any business compliant with the new accounting standards.
With Oracle Financial Services Data Foundation, you get a complete data lifecycle management for any analytical need your financial institution will need. It will cover the risk, treasury, finance and compliance domains.
Its Financial Services Loan Loss Forecasting and Provisioning will effectively calculate credit losses across different situations, and then come up with an effective interest rate. This will also determine interest adjustments per business.
Another important solution is Oracle Business Intelligence, which offers important disclosure information. The company’s user interface is able to generate easy to understand risk parameters and implement reserve adjustments.
This is a trusted partner to help your business go through the transition to CECL easy and quick. The company has a great team of advisory service providers who are capable of helping any financial institution prepare for any implications the new standards will bring, whether operational or organizational.
With their help, you can ensure that your business’ risk management processes are in line with the CECL guidance. They can also help you develop rational and supported forecasts in matters pertaining future performance of a credit or portfolio. Sageworks will also help you complete a data integrity assessment that will see to it that your business has been compliant with CECL standards. It will also improve your data warehouse as well as analyze all the data methodology options you have within your range of services.
This is a web-based solution that financial institutions can use in the calculation and accounting of expected credit losses in their businesses as well as the performance of loss reserving. The models provided by SAS must be used by a business on a regular basis for it to capture any changes in its range of services and account for those changes. These models will provide the business’ ability to review its immediate data, make adjustments if they are required and report the final findings. The company provides models that will promote transparency in the entire process of CECL implementation.
SAS in itself is a very important software solution that comprises of a suite of products each with various features that will help the business achieve a successful transition to the new accounting standards.
9. SS&C Technologies
This is a company that has been helping investment and financial firms to take advantage of rising opportunities in the global market. With over 30 years of experience, SS&C Technologies believes that it has what it takes to understand individual needs of different financial institutions to provide the help and solutions they need in the implementation of CECL accounting standards. The company uses the best technology-powered solutions and services so as to help the businesses they serve run their operations competently for more profits. SS&C Technologies offers a balanced and practical approach to CECL.
10. Wolters Kluwer
This is a reliable CECL software provider offering several solutions to help financial institutions create a credit loss model that is more reliable and accurate. The company has solutions that will help lenders develop and create expected credit loss models that will be run in multiple situations. It also features credit loss calculators that work in different macroeconomic setups. With this solution provider, every financial institution will get a specific CECL reporting just as FASB requires. You will also get accounting schemes which include some explanation for expected credit losses for the length of time you will be using the solution.
To minimize the challenges expected in the implementation of CECL accounting standards, financial institutions needs to identify a solution provider that will offer the exact kind of solution they are seeking.