Field-tested, end-to-end solution in 5 phases
With the FASB introducing new accounting regulations regarding the impairment of loans, financial institutions are required to revisit their existing loss provisioning models. To identify gaps between the status quo and CECL guidelines, EXL has developed a comprehensive gap assessment framework to evaluate existing models (e.g. CCAR, BASEL) against CECL guidelines. Based on data availability and sophistication of existing models, we analyze which components can be leveraged (with some modifications) to become CECL compliant.
EXL’s accelerators for CECL planning:
Data Readiness Checklist | Model Readiness Checklist | Resource Estimation Tool
Our expert modelers have devised sophisticated techniques to address the most complex facets of CECL modeling:
- Life of a loan estimation for different asset classes
- Future losses attribution to current snapshot balance for revolving credit instruments
- Macroeconomic factors in the forecasting approach
EXL’s Accelerator to expedite CECL modeling:
Data Quality Monitoring Tool
EXL offers years of experience in the credit risk domain. We have helped leading global banks in their CCAR, IFRS, and Basel journeys. For loss model development, we estimate optimal segments for your products based on similar risk characteristics using credit score, delinquency status, and other key indicators. Balance liquidation curves, effective life, and charge-off rates are analyzed and validated on multiple vintages to finalize segments for your portfolio.
Product Segmentation Framework
Our CECL experts can suggest the right modeling approach from a set of segment and account level modeling methodologies based on portfolio size, data limitation and life of the loan. Different model approaches require different levels of effort and may perform differently in terms of accuracy and volatility in loss estimates due to portfolio dynamics.
EXL’s Accelerators for loss modeling:
Materiality Assessment Tool | Model Approach Selection Tool | MicroAnalytics™ Toolkit
We have a comprehensive framework to validate and thoroughly test a CECL model using back-testing, stress testing, benchmarking analysis, and sensitivity analysis. EXL's team has used our vast experience with similar regulatory submissions (CCAR/DFAST, IFRS9, Basel) to prepare templates required for model documentation, independent validation and leadership review for CECL. During implementation, we will align with your cross-functional teams to establish a CECL framework, ensuring a smooth transition to CECL governance.
Q-Factor Adjustment Framework | Model Documentation Template | Model Validation Template
Our focus on analytics builds a deep understanding of the context in which you do business.
CECL for credit card issuers
CECL Considerations for Credit Cards