Partnering Toward CECL Compliance
**Please check our most recent blog post regarding the latest changes to the FASB deadlines.**
In a December 18 article, SNL Financial indicates that FASB’s vote on CECL scheduled for the first quarter of 2016 will result in passage of CECL “without fundamental changes” to the current draft. “Passage is all but guaranteed,” the article asserts.Even in light of earlier considerations that there could be substantive changes to the current draft, we have encouraged bankers to begin preparing for CECL. And we have been working on ways to support you in the transition. Because despite the change in format, estimating the ALLL will continue to be a bank-specific process; FASB will not specify an allowance methodology, nor even restrict you to certain methodologies. Each bank must determine its own approach to complying with CECL.
The MST Loan Loss Analyzer was designed as a tailored solution, and partnering with bankers toward a CECL model requires no less. To help you prepare, we have developed 7 steps to consider to transition from an incurred loss model to a CECL-compliant model and build a timeline so that you will be ready when the time comes.
7 Steps to Consider in Transitioning to a CECL-Compliant Model
1) How long do you anticipate ALLL automation taking place from review, vetting, purchase to implementation?
2) How long will you allow for CECL modeling? Aligning macroeconomic forecasts throughout the organization (i.e. in capital planning and CECL) or documenting why the differ.
3) How long will you allow for developing reports to facilitate governance and oversight?
4) How long will it take to document updated processes and controls?
5) How long will it take to assess the impact on ICFR (Internal Controls over Financial Reporting), identify gaps and address them?
6) How long do you need for capital and/ or P & L planning?
7) How long will it take for audit and regulatory approval?
5 Steps to Prepare for CECL
We have also developed a five-step approach to preparing, which involves everything from studying the available updates and guidance, to conferring with us, your accountants and auditors, to shadowing your current incurred loss model calculations with prospective CECL models to determine the impact CECL will have on your allowance.
For the most up-to-date information regarding CECL and the impending deadlines check out our most recent blog posts.