Managing Commercial Real Estate for your European Exposures
May 31, 2018
WebPage
Whitepaper
Prudent credit risk management ensures institutions maintain sufficient capital and limit the possibility of a capital breach. With CECL and IFRS 9, the resulting trend toward greater credit earnings volatility raises uncertainty in capital supply, ultimately causing an increase in required capital. It is ever more challenging for institutions to manage their top-of-the house capital while steering their business to achieve the desired performance level. This paper introduces an approach that quantifies the additional capital buffer an institution requires, beyond the required regulatory minimum, to limit the likelihood of a capital breach. In addition, we introduce a new measure that allocates capital and recognizes an instrument's regulatory capital requirements, loss allowance, economic concentration risks, and the instrument's contribution to the uncertainty in capital supply and demand. In-line with the Composite Capital Measure introduced in Levy and Xu (2017), this extended measure includes far-reaching implications for business decisions. Using a series of case studies, we demonstrate the limitations of alternative measures and how institutions can optimize performance by allocating capital and making business decisions according to the new measure.
Presentation
Our subject matter experts, Chris Henkel, Senior Director, and Anna Krayn, Senior Director, discuss critical steps in meeting the new CECL standard.
Webinar-on-Demand
Our subject matter experts, Chris Henkel, Senior Director, and Anna Krayn, Senior Director, discuss critical steps in meeting the new CECL standard.
Whitepaper
Reserving for loan loss is one of the most important accounting aspects for banks. Its objective is to cover estimated losses on impaired financial instruments due to defaults and non-payment. Reserve measurement affects both the balance sheet and income statement. It impacts earnings, capital, dividends and bonuses, and attracts the attention of bank stakeholders ranging from the board of directors and regulators to equity investors. In response to the so-called “too-little, too-late” problem experienced with loan loss reserve during the Great Financial Crisis, accounting standard setters now require that banks provision against loan loss based on expected credit losses (ECL). Arguably, calculating the Expected Credit Loss Model under IFRS 9 and CECL presents a momentous accounting change for banks, with the new standards coming into effect sometime between 2018 and 2021, depending on the jurisdiction.
FAQ
The FASB's current expected credit loss (CECL) standard requires timely, forward-looking measurement of lifetime risk using credible models. Moody's Analytics answers leading questions from your peers related to modeling challenges for CECL implementation.
March 2018
Pdf
FAQ
The FASB's current expected credit loss (CECL) standard requires a significant amount of historical data for forward-looking measurement of lifetime risk. Moody's Analytics answers leading questions from your peers related to data challenges for CECL implementation.
March 2018
Pdf
FAQ
FASB's current expected credit loss (CECL) standard requires timely, forward-looking measurement of lifetime risk using "reasonable and supportable" forecasts. Moody's Analytics answers leading questions from your peers related to the forward-looking elements of CECL implementation.
March 2018
Pdf
FAQ
In 2017, Moody's Analytics surveyed U.S. firms on their prepardness for CECL. We asked questions from gap analysis, data gathering, model and methodology selection, reasonable and supportable forecasts, to workflow automation. Read more to hear what your peer firms have to say about their current efforts and ability to meet the new CECL standard.
February 2018
Pdf
Webinar-on-Demand
In this video webcast, we identify the critical components needed for a successful CECL implementation and the new considerations it also brings.
Webinar-on-Demand
In this video webcast, we identify the critical components needed for a successful CECL implementation and the new considerations it also brings.
Webinar-on-Demand
In this video webcast, we identify the critical components needed for a successful CECL implementation and the new considerations it also brings.
Webinar-on-Demand
In this video webcast, we identify the critical components needed for a successful CECL implementation and the new considerations it also brings.
Webinar-on-Demand
In this video webcast, we identify the critical components needed for a successful CECL implementation and the new considerations it also brings.
Webinar-on-Demand
In this webinar, we examine how CECL's forward-looking requirements can significantly change your loss reserves and future financial statements.
Webinar-on-Demand
In this video webcast, we identify the critical components needed for a successful CECL implementation and the new considerations it also brings.
Article
FASB's new accounting standard will have a significant effect on financial statements. Financial institutions must educate their investors and shareholders about how CECL-driven disclosure and reporting changes could potentially alter the bottom line.
Presentation
Under CECL and IFRS 9, forecasting expected credit losses will be paramount. Join Moody's Analytics experts as they discuss our macro and regional forecasting. Learn how our full suite of scenario capabilities for CECL, IFRS 9, BAU, and stress testing can help your firm meet this essential requirement.
Webinar-on-Demand
Join Moody's Analytics for an informative webinar discussing FASB's new Current Expected Credit Loss (CECL) standard and what you can be doing now to prepare.
November 2017
WebPage
Eric Snyder
Interview
In this video, Anna Krayn discusses her observations on how institutions can prepare for CECL implementation, including improvements to technology and processes and conducting quantitative impact studies.
Interview
In this video, Chris Henkel explains how the new CECL standard affects the measurement of expected credit losses and what institutions can do to prepare for implementation.
Interview
In this video, Masha Muzyka discusses how operational complexities and comparability issues contributed to the changes from purchased credit impaired (PCI) accounting to purchased credit deteriorated (PCD) accounting under CECL.
Interview
In this video, Chris Henkel identifies the key factors institutions need to consider during the planning process and how to improve the measurement of credit risk over the lifetime of a loan.
Interview
In this video, Cris DeRitis reviews the advantages and disadvantages of the different type of models that are acceptable for CECL. A portfolio-level approach is a simpler modeling method, but lacks granularity.
Interview
In this video, Cris deRitis reviews the types of models institutions can leverage to be CECL-compliant including loan-level, loss given default, probability of default, expected at default, vintage cohort, or portfolio-level models.
Interview
In this video, Cris DeRitis explains how institutions can leverage existing models and modify them to be compliant with the new CECL standard. Acceptable models institutions can use include Dodd-Frank Act Stress Testing (DFAST), though-the-cycle or internal models.
Interview
In this video, Cris deRitis discusses how single versus multiple scenarios can impact loss provisions and affect volatility in portfolios. One advantage of a single scenario is the simplicity, but it only provides one number under one scenario which can cause volatility over time.
Interview
In this video, Anna Krayn explains the key challenges institutions are facing with data, modeling, governance, and technology due to the new CECL accounting standard.
Presentation
In this presentation, Emil Lopez and Olivier Brucker from Moody's Analytics, demonstrates how the Moody's Analytics Credit Loss and Impairment Analysis suite helps financial institutions overcome challenges with CECL and implement best-practice allowance processes.
Webinar-on-Demand
In this webinar, Emil Lopez and Olivier Brucker from Moody's Analytics, demonstrates how the Moody's Analytics Credit Loss and Impairment Analysis suite helps financial institutions overcome CECL challenges and implement best-practice allowance processes.
