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Accounting for Loan Losses: CECL’s Coming Down the Pike

Posted: Nov 17, 2022 | Author: Mark DeBree, Catalyst Strategic Solutions Managing Principal
Catalyst Strategic Solutions  CECL 

Talked about for years, implementation of FASB’s Current Expected Credit Loss accounting standard is now only weeks away. Known as CECL, the new accounting standard becomes effective January 1, 2023.

CECL will change how credit unions account for expected credit losses. Instead of calculating bad debt reserve based on years past, CECL will require calculating bad debt using forward-looking, predictive information. Credit unions will have to evaluate their potential credit losses and make an allowance for the total expected credit losses over the life of their loans.

If you haven’t done so already, your credit union should be evaluating solutions and determining the type of modeling that will work best for you. The significance of this accounting change warrants assessing the economic impact on your balance sheet as soon as possible.

You can still find a CECL partner with Catalyst Strategic Solutions. Their robust, self-directed online platform –  CECLution.org – is designed for small to mid-sized credit unions and larger credit unions with limited complexity.

The user-friendly platform offers several benefits:

  • Captures and maintains historical data
  • Automatically integrates economic data
  • Displays credit union and peer data
  • Enables fully customizable Q-factors and carve-outs
  • Preserves core assumptions for easy updates
  • Saves and stores forecasts 

CECLution was built to meet credit unions’ unique needs for compliance, affordability and efficiency. For example, each time a new quarterly call report is filed, credit union data is uploaded automatically to the CECLution platform. Aggregation and storage of historical data also eliminates the task of extracting and forwarding data with every report. Having access to all this data allows you to see forecasted loan losses compared to historical loan losses. 

CECLution is an independent, fast and flexible alternative to in-house solutions. The platform gives credit unions the opportunity to customize inputs that accommodate different assumptions. Because it is offered on a subscription basis, credit unions receive unlimited access to the platform.

Catalyst Strategic Solutions is ready to partner with your credit union to plan and implement CECL compliance strategies. To find out how CECLution can help simplify the impending transition, contact your Area Sales Manager or call 800.442.5763.

 

As Managing Principal at Catalyst Strategic Solutions, Mark directs risk consulting, balance sheet advisory and broker/dealer services for credit unions nationwide. Formerly the organization’s Vice President of ALM Services, Mark has extensive experience consulting credit unions on interest rate risk, liquidity risk, strategic planning, member deposit behaviors and mortgage servicing portfolios.

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