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Portfolio Risk & CECL

2019’s Most Popular Blog Posts about CECL & Portfolio Risk

Mary Ellen Biery
December 31, 2019
Read Time: 0 min

Key Takeaways

  1. Risk management practices were on the minds of bankers in 2019
  2. Some of the most popular blog posts of 2019 were about stress testing and CECL.

Risk management practices were in the spotlight in 2019

Managing risk is at the very core of the business of banking, so it’s not a huge surprise that readers of Abrigo’s blog spent a lot of time in 2019 reading about the topic. Concerns over an economic slowdown and the transition to the current expected credit loss model, or CECL, put risk management practices on the minds of many bankers.

Among the most popular blog posts of 2019 were articles about stress testing, one of the most familiar of risk management practices in banking because it evaluates risks associated with issuing credit. Posts about CECL, which goes into effect for the largest SEC registrants in 2020, also drew a large number of pageviews as readers sought news and tips for dealing with the new standard. Even those banks and credit unions who received extra time to prepare for the change took important steps to move forward with implementation, heeding the CECL advice of SEC peers.

CECL and stress testing

 

  1. 4 Methods of Stress Testing An institution can use a variety of methods of stress testing to evaluate loan portfolio risk and to measure the potential impact on earnings and capital based on its own specific risk profile. 
  2. FASB Gives Breathing Room on CECL to Smaller SEC Filers, Private Cos In July, small public banks, privately held banks, and credit unions learned they’ll get extra time to get CECL right, following the FASB’s decision to extend the timeframe for many financial institutions.
  3. What is the PD/LGD Transition Matrix Model for CECL? The transition matrix model (TMM) determines the probability of default of loans by tracking the historical movement of loans between loan states over a defined period of time – for example, from one year to the next – and establishes a probability of transition for those loan types between different loan states.
  4. Measuring Loan-Portfolio Credit Quality What can institutions do to get a better handle on the credit risk within their loan portfolio? Here are two suggestions.
  5. CECL Methodology – Vintage Analysis Application Vintage analysis accounts for expected losses by allowing an institution to calculate the cumulative loss rates of a given loan pool and in so doing, to determine that loan pool’s lifetime expected loss experience.
  6. How to Forecast Future Expected Credit Losses A central difference between CECL and the incurred-loss model is that financial institutions will need to estimate credit losses over the life of the loan.
  7. What’s the Most Effective Way to Hedge Interest Rate Risk? Properly using core deposits to fund long-term assets is a cost-effective hedge against interest rate risk.
  8. ALLL Methodologies: Migration Analysis Migration analysis uses loan-level attributes to track the movement of loans through the various loan classifications in order to estimate the percentage of losses likely to be incurred in a financial institution’s portfolio.
  9. CECL for Non-Banks: What to Expect The new credit impairment standard will be a large modeling change for both mortgage and equity REITs.
  10. CECL Paralysis: How to Avoid Common Implementation Hurdles Abrigo experts discussed some of the common CECL implementation hurdles that financial institutions have encountered so far, along with some suggestions for overcoming them.

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About the Author

Mary Ellen Biery

Senior Strategist & Content Manager
Mary Ellen Biery is Senior Strategist & Content Manager at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. A former equities reporter for Dow Jones Newswires whose work has been published in

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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