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Practical CECL Case Study: Hidden Complexities

The CECL standard grants institutions broad latitude in the data and information used in measurement; the standard is non-prescriptive in methodologies to be used (though does go so far as to enumerate several sensible options). A great deal of content from the supervisory and accounting communities, as well as other practitioners, focuses on simple analyses that are mentioned in the standard – loss-rate and vintage approaches are commonly discussed.

In this case-study focused paper, we first examine problems with a specific institution’s loss-rate approaches and then construct a defensible projection of lifetime credit loss without meaningful first-party losses or historical loan-level detail.

In this whitepaper:

  • Initial assessments of loss rate, vintage, remaining life, and segmentation approaches
  • Analysis and synthesis of the information discussed
  • Application with Rocket Bank’s information