Credit unions’ CECL preparation efforts can reveal challenges that are quite different from those facing banks, and data-related concerns are a prime example. However, understanding these data issues and sound planning can ensure a smooth credit union transition for the Current Expected Credit Loss model, or CECL, by the 2023 deadline. Abrigo advisors recently discussed CECL data and credit unions during a webinar, “CECL in 2023: Steps to Take This Year.”
The current expected credit loss model (CECL) doesn’t prescribe specific approaches for credit unions to develop estimates for the allowance for credit losses. However, for credit unions especially, data is a key consideration in CECL methodology selection.
“The standard gives you a lot of options on how to estimate future credit losses,” Garver Moore, Managing Director of Abrigo Advisory Services, said during a recent webinar hosted by Abrigo. “And those different options have different data requirements, including the amount of data you need, how far back it goes, and what that data covers.”
What data is needed for CECL
In its Frequently Asked Questions on CECL, the National Association of Federal Credit Unions (NAFCU) noted that the specific data used in CECL models will vary among institutions. Nevertheless, a survey NAFCU performed found respondents anticipated collecting 22% more data points than they did presently. Common data pieces for CECL, according to the NAFCU, may include: