Which of the CECL methodology options are best for your institution?
The Current Expected Credit Loss model (CECL) will be a significant change to the current process each financial institution uses to estimate its allowance for loan losses. But the real question is: How do you implement a new model that is so different from what you’re accustomed to using?
The answer is planning. Working on your CECL methodology now will give your institution time to identify issues and fine tune your model and methodology while you can. But first you must choose your methodology.
In this white paper, you’ll explore six different CECL methodologies your institution can use to implement CECL before the deadline:
- Cumulative loss rate
- Weighted average remaining life to maturity (WARM)
- Vintage loss rate
- Migration analysis
- Probability of default
- Discounted cash flow
You’ll also take away best practices around governance and board responsibilities, along with three steps to get started with CECL.
Download whitepaperOur team
Brett D. Schwantes, CPA
Brett Schwantes has over 25 years of experience working closely with financial institutions and is the leader of the Audit and Accounting Committee for the financial institutions practice of Wipfli LLP and a member of Wipfli’s Accounting Standards Advisory Group. He advises clients on various unique and complex issues such as derivatives, fair value measurements of financial instruments, and the new CECL accounting standard. Brett also consults with clients on the impact of new accounting standards and how best to implement them to avoid negative consequences whenever possible.
Nick G. Ansley, CPA
Nick Ansley is a partner who brings more than 15 years of invaluable experience to financial institution clients. He has particular expertise with external audit and accounting and control issues that specifically impact financial institutions. Nick also has extensive commercial loan review experience. He has worked with large banks to develop internal control narratives and testing programs to assist them with FDICIA compliance requirements. Bringing additional value to his clients, Nick also assists with various agreed-upon procedure engagements and internal control reviews.
