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Seven Steps to CECL Compliance Explored

Brandy Aycock
April 15, 2016
Read Time: 0 min

**Please check our most recent blog post regarding the latest changes to the FASB deadlines.**


Part of a seven part blog series

Step One: Automate

Abrigo has developed a seven-step process to help you in your transition from the incurred loss to the CECL approach to calculating your allowance. The seven steps are accompanied by an online timeline calculator: the steps to help you organize your CECL preparations, the calculator to help you track your progress and stay on schedule.

This is the first of a seven-series blog, each addressing one of the steps.

Step 1. Automating the allowance calculation process.

CECL will require banks and credit unions to assemble and use so much more data than they use to estimate their ALLLs under the incurred loss model. To make projections about the future, you’ll need to assimilate more from the past, details and analysis on loans and loan categories and pools for several years past, plus economic data, to help you determine the fate of loans years into the future.

With CECL an impending reality, Sarah Cowan of National Bank of Middlebury, Vermont, decided Excel will no longer provide an acceptable allowance analysis. CECL and several other practical matters drove Cowan to select an automated solution, Loan Loss Analyzer.

“Most importantly, we wanted to reduce the time and human resources involved with all these spreadsheets,” she explained. “We wanted a more consistent and process-driven methodology, fewer changes on the fly. We also wanted to include finance and our senior credit administrator in the process.”

Sixty-four percent of the respondents to our 2015 banker survey found themselves in a similar situation, still using Excel to calculate their quarterly allowance. Sixty-six percent of those agree they will convert to an automated system to estimate under CECL. A similar survey, by tax, audit and consulting firm RSM, found like results among 338 respondents: 73 percent still use Excel, 63 percent of those admit their current approach will be insufficient to calculate their allowances under CECL, and only 37 percent of them believe their “current system provides enough historical data to estimate life of asset losses and prepayment speeds.”

The first step in preparing for CECL is assembling the data you’ll need. And if you do not already have an automated system for dealing with that data, that could be your first move.


About the Author

Brandy Aycock

Brandy Aycock is Director of Event Marketing at Abrigo.

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.

Make Big Things Happen.