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The pros and cons of using spreadsheets – abiding by regulatory parameters

Sageworks
April 17, 2014
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Banks and credit unions have utilized spreadsheets as a primary tool in risk management for decades. Unfortunately, over-reliance on these spreadsheets has become an area of serious regulatory concern, as many of the benefits offered by spreadsheets are often shadowed by potentially significant risks. Compliance with regulatory parameters is one of the top-of-mind concerns.

Pros
The manipulability of spreadsheet software allows institutions to quickly adapt to changes in regulatory parameters as they become available, enabling timely adaptations of methodologies and associated calculations.

Cons
This ability to make timely, regulatory-driven adaptations does, however, carry with it the inherent burden for the financial institution to be cognizant of those changes, their effective dates and how those changes impact reports generated in spreadsheets. Regulators are generally concerned as to whether or not institutions have the wherewithal to make those appropriate adaptations.

They have also voiced concern that spreadsheets may prove ineffective for more complicated proposals. Consider for example the FDIC’s recent comments regarding the implementation of the proposed CECL model: “It is likely that many banks, particularly community banks, currently do not have readily available the types of data that would be needed to implement the CECL model.”

Suggestions
When considering changes in regulatory parameters, it is recommended that individuals look to credible sources of the underlying guidance and/or formal interpretations of that guidance. Webinars, whitepapers and other published articles can serve as a terrific source of information, while consulting with third party risk management and/or accounting firms can also provide additional depth and

address specific questions. Moreover, consider taking advantage of joining and participating in available bankers forums, which can lead to a collaboration of industry experts, ideas and knowledge.

For a more in-depth discussion of the pros and cons of using spreadsheets, download the whitepaper Regulatory Concerns with Spreadsheets in Risk Management.

About the Author

Sageworks

Raleigh, N.C.-based Sageworks, a leading provider of lending, credit risk, and portfolio risk software that enables banks and credit unions to efficiently grow and improve the borrower experience, was founded in 1998. Using its platform, Sageworks analyzed over 11.5 million loans, aggregated the corresponding loan data, and created the largest

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