An Essential Solution to Manage Your CECL Implementation

Get Ready for Regulatory Reporting

Under the Financial Accounting Standards Board (FASB) methodology for forward-looking current expected credit loss (CECL), companies will need to set aside allowances accounting for the lifetime of expected credit losses (ECLs). They should also consider reasonable and supportable alternative scenarios to evaluate the impact of different future trajectories.

However, there can be many challenges in estimating loss rates, including:

• The exposures lack external ratings
• Internal losses are minimal or non-existent
• Length (time-period) of data is insufficient
• Current portfolio composition differs from that in historical data
• Current macroeconomic conditions differ from those in historical data
• Lack of information/data on economic changes and outdated forecasts

The CECL Scorecard methodology extends Probability of Default (PD) and Loss Given Default (LGD) to an instrument’s remaining lifetime and uses macroeconomic forecasts to construct a forward-looking term structure before calculating ECLs.

For rated instruments, we use credit ratings in the first step of our CECL Scorecard methodology for estimating ECLs, based on historical default data contained in our CreditPro® product offering.

Model-based alternative scenarios help you estimate future impairment, gain clarity about future risks, and comply with CECL requirements.

• See what is driving national and regional economies, future directions and risks.
• Implement risk management via alternative scenarios and portfolio modeling.
• Understand forecasts of future policy actions and the market impacts.