has launched SimpleCECL, a solution providing loan-level analyses for Current Expected Credit Loss (CECL), provisioning reserves at the time of origination. Issued by the Financial Accounting Standards Board (FASB), CECL is the new “expected loss” accounting model for estimating the Allowance for Loan and Lease Losses (ALLL). It replaces the current “incurred loss” model and goes into effect in 2020 for SEC-filing institutions and 2021 for all other financial institutions.
SimpleCECL uses the credit and prepayment model of Andrew Davidson & Company Inc., a provider of risk analytics and consulting, and, through LoanScorecard technology, provides a cost-effective loan loss calculation for all size financial institutions.
The user-friendly solution provides loan-level CECL analysis to ensure accuracy and compliance for all loans originated, including those with a policy exception. SimpleCECL forecasts loan performance in various scenarios. The stress testing provides results in three scenario probabilities—a base case, an adverse case, and a severe case. SimpleCECL provides the exact calculation for loan loss reserves under the new regulation.
“As soon as a loan closes, before the borrower even makes their first payment, financial institutions must set aside loan loss reserves, but manually calculating that number is challenging, especially for banks and credit unions with limited resources,” said Ben Wu, Executive Director at Loan Scorecard. “Even the most CECL-ready organizations have yet to solve this impact on the balance sheet. Without provisioning at the time of origination, a bank is out of compliance and reserves are inaccurate. SimpleCECL solves this challenge, providing an accessible solution for all banks and credit unions with an automatic calculation for loan loss reserves to ensure CECL compliance.”