With potential increases in economic volatility, understanding credit exposure will be critically important to remaining competitive and profitable. This paper explores how strategically utilizing your CECL data can be a valuable tool for the entire enterprise.
The Financial Accounting Standards Board’s Current Expected Credit Loss (CECL) standard is a game-changer for banks and credit unions. The rule requires financial institutions to replace their current incurred loan loss approach with a lifetime expected loss estimate. As part of the preparation for CECL, financial institutions must collect and maintain considerably more historical data than most institutions currently capture on their customers.
Discussions with auditors have indicated as much as 10 years of data should be captured, rather than the 1 to 3 years they have been traditionally maintained. And that’s where the strategic advantage of CECL can come in – if financial institutions follow the right game plan.