It’s crunch time.
SEC filers will start estimating their allowances according to CECL as of the first quarter of 2020, just a little more than a year and a half from now. Considering they will want to run parallel incurred loss and CECL methodologies for several quarters – a year is recommended – most lenders, including private companies, are knee-deep in preparations, setting up transition committees, gathering data, studying methodologies.
Many have determined they will need third party assistance, and as has been predicted since the FASB announced the new accounting standard in the summer of 2016, the demand for external expertise is now straining supply. Resources are at a premium.
MST has been at the forefront of advising institutions to get started in the transition early, and if they determine they need third party support, to conduct their due diligence and select a partner as expediently as possible. And we have been proactive in anticipating the increase in demand.
You might say we took our own advice. A couple of years ago, we created a new subsidiary, MST Advisory Services, specifically to help institutions in their CECL transitions. As the pioneer and leading provider of allowance automation, our sole focus, we understood that each institution would need a CECL solution specific to its organization and loan portfolios. So, we bolstered the ranks of the Advisory with additional experts, leading industry figures, in all disciplines related to developing an allowance process and policy – accounting, modeling, economics, engineering – to accommodate institutions’ needs and compliance requirements.
As we added expertise, we began a search early in 2017 for additional resources. We wanted to grow at a pace consistent with demand without diluting our expertise or sacrificing our focus on the allowance or our approach to client support, a service we have been committed to since our founding in 1999 and which year-to-date has earned a 100 percent client satisfaction rating on support tickets. The search led to our acquisition by risk and compliance management firm Banker’s Toolbox. The union bolsters our capacity in multiple ways, including with the expertise of their team of seasoned bankers, former regulators and information technology experts, as well as the financial resources of Accel-KKR, the private equity firm behind Banker’s Toolbox, which allows us to extend our services and grow our professional network.
In a recent blog, we talked about looking at CECL as a process not an event. Even after the race to implementation has been run, making CECL work for your institution will involve an extensive and enterprise-wide ongoing commitment.
“We’re focused on meeting the basic requirements now, but in 10 years (CECL) will have evolved to where the analytics and assumptions around each loan will be more intense,” wrote MST Senior Advisor Shane Williams. “The result will be a much better idea of what is happening in your loan portfolio.”
Joining forces with Banker’s Toolbox adds to our capacity and ensures our ability to continue providing the industry-leading support you will need not only to comply with the CECL standard but to capitalize on the opportunities it offers to improve performance, grow your business and ensure a safe and sound future.