CECL Solution
CECL, which stands for Current Expected Credit Loss, is a new accounting standard issued by the Financial Accounting Standards Board (FASB) for estimating loan losses. For credit unions, the new standard takes effect with their fiscal year that begins after December 15, 2022.
The CECL accounting standard changes how credit unions are required to account for expected credit losses. Several methods are permissible within the accounting guidance. At a high level, CECL requires estimating future losses based on a combination of historical experience, economic conditions and a reasonable, supportable forecast.
Catalyst Strategic Solutions can help credit unions implement their CECL compliance strategies through its credit union-based CECLution platform.
The CECLution Platform Created by Professionals
CECLution is an independent, fast and flexible alternative to in-house solutions. The user-friendly platform gives credit unions the opportunity to customize inputs that accommodate different assumptions. Because CECLution is provided on a subscription basis, credit unions have unlimited access to the platform.
CECLution is developed and managed by Catalyst Strategic Solutions. Catalyst Strategic Solutions is a wholly-owned subsidiary of Catalyst Corporate Federal Credit Union supporting credit unions with balance sheet management, consulting services, advisory, and risk management solutions.
This experience requires Catalyst Strategic Solutions to stay up to date on credit unions and the rules and regulations that govern them. For credit unions with non-complex balance sheets, CECLution is an affordable, accessible, and efficient CECL solution.
Features & Benefits:
-
An economic-based model that uses Weighted Average Remaining Maturity (WARM) methodology
- The WARM methodology is specifically cited by the FASB as one of the accepted methods to estimate allowances for credit losses (ACL). This method uses an average annual charge-off rate and the loan portfolio’s remaining life to estimate the credit union’s ACL.
- Aggregation and storage of historical data, eliminating the need to extract and forward data with every report
- With CECLution, there is no need to recompile and calculate a credit union’s ACL every quarter. Data is automatically compiled into the aggregated historical data with each passing quarter.
- Automatic upload of new data to CECLution platform each time a new quarterly call report is filed
- Once a call report is filed, CECLution automates the changes required by the CECL accounting standard, automatically inputting new data. That means credit unions can spend more time serving their members, while remaining compliant with CECL.
- Clarity of forecasted loan losses relative to historical loan losses
- It’s crucial for credit unions to know where they have been and where they are likely going. The WARM methodology clearly shows historical credit losses and predicts future credit losses, giving institutions a sense of where they are situated in time. As quarters pass, CECL does the heavy lifting by fine-tuning forecasted losses.
- A cost-effective model, specifically built for credit unions' unique compliance needs
- CECLution is designed to be a flexible and affordable option for non-complex credit unions. Additional compliance regulations should not be a major safety concern. With CECLution, credit unions benefit from the safety provided by the new regulatory compliance without offsetting the benefit with burdensome costs.
CECLution aligns with industry best practice by capturing historical data, establishing a sound relationship to your chosen economic benchmark, and preparing a long-term forecast to estimate losses over the life of your loans.
Catalyst Strategic Solutions can partner with your credit union to assist in a successful transition to the new CECL accounting standard.
"Catalyst" is a brand name for the financial services business conducted by Catalyst Corporate Federal Credit Union ("Catalyst"), both directly and through its subsidiaries, including CUSOURCE, LLC, d/b/a Catalyst Strategic Solutions ("CSS"). Balance sheet management services and asset liability management services are offered through CSS, a SEC registered investment adviser. CSS is a separate entity from Catalyst and all investment decisions are made independently by CSS employees. Neither Catalyst nor CSS provide its clients with legal, tax or accounting advice.