Current Expected Credit Losses (CECL) is a new credit loss accounting standard that was issued by the Financial Accounting Standards Board (FASB). CECL replaces the current Allowance for Loan and Lease Losses (ALLL) accounting standard, which relies on incurred losses, while CECL requires estimating expected losses over the life of loans.
CECL is expected to have significant implications to financial institutions. The new standard will impact financial reserves and forecasts; loss models and accounting processes; and data gathering and disclosures.
Missing forecasts can drive volatility in allowances for loan losses
Excessive reserves will reduce the available capital to lend
Shareholder value may drop if loan loss reserves are too high
Criticism from examiners and external audit firms
Penalties if not compliant by the implementation date
CECL model implementations don’t happen soon enough or take too long
Choosing the right model with the highest level of accuracy is critical to mitigating risk and having the right level of loss reserves. Black Knight has several models to help support your CECL compliance.
GET THE MOST ACCURATE LOSS FORECASTS
DETERMINE PROBABILITY OF DEFAULT/LOSS IN YOUR PORTFOLIO
PREPARE DUPLICATE FINANCIAL STATEMENTS PRE-CECL ADOPTION
PERFORM FORWARD-LOOKING ANALYSIS ON “LIKE” LOANS TO YOUR PORTFOLIO
HELP YOUR ANALYSTS CREATE WHAT-IF MODELS TO MONITOR/REFINE
Black Knight is the industry’s leading provider of mortgage technology, data and analytics. We have the largest deposit of loan-level historical and current mortgage data, and highly accurate modeling solutions. Our credit modeling experts can help you pre- and post-CECL adoption so your organization is ready.