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The implementation window for the new Current Expected Credit Loss (CECL) standard may seem plenty big enough, but there are loads of decisions to be made, such as “how will we calculate this?” “Decide on methodology and start implementing as fast as you can,” advised Masha Muzyka, Senior Director, Regulatory and Accounting Solutions at Moody’s Analytics. She was part of a round-table discussion, held on January 10, 2018, about the transition to CECL. The webcast was organized by the Global Association of Risk Professionals (GARP). The new CECL standard will bring significant changes, such as a spike in earnings volatility. […]

Constructing an accurate financial model for the Current Expected Credit Loss (CECL) may present problems to some banks. Possibly a bank is collecting data for annualized charge-off rates. However, that would overlook the question: “how would that inform someone as to the loss rate over the lifetime of the portfolio?” asked Michael Gullette, SVP, Tax and Accounting at the American Bankers Association. The question boils down to whether a bank has enough data of the right kind to see trends and relationships. “And if you have the data, what is the quality?” Gullette said. He was part of a round-table discussion […]

The “reasonable and supportable” clause of the new Current Expected Credit Loss (CECL) standard “is the most hotly debated part” of the regulation, according to Cristian deRitis, Senior Director, Consumer Credit Analytics at Moody’s Analytics. He was part of a round-table discussion about the transition to CECL that was webcast by the Global Association of Risk Professionals (GARP) on January 10, 2018. CECL is the new credit impairment standard under Financial Accounting Standards Board (FASB). “Auditors are grappling with what ‘reasonable and supportable’ means, too,” he added. For best practice in terms of modelling credit risk, the phrase boils down to whether […]