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    Concentration Risk Consideration During the Allowance Process and COVID-19's Impact

    COVID-19 created additional complexities for institutions navigating CECL accounting standard. This paper provides a natural quantitative approach for incorporating concentration in the allowance process and portfolio management.

    April 2020 WebPage Dr. Amnon Levy, Masha Muzyka, Pierre Xu

    Non-bank Players are Ready for CECL — Are Banks?

    The initial intent of the CECL guidelines was to make loan-loss allowances more reactive to the credit environment. By setting aside greater allowances, organizations would be better prepared for a default.

    February 2020 WebPage Dr. Amnon Levy

    PCD assets post-CECL: The real-world implications of an accounting change

    One benefit CECL will bring to the accounting space is moving away from the complicated and burdensome accounting for Purchase Credit Impaired (PCI) assets.

    January 2020 WebPage Scott Dietz

    Cards and CECL estimates

    Recent CECL impact disclosures point directly to credit cards as the largest driver of the allowance. We can confirm those recent disclosures by looking at the consumer default volumes chart in Figure 1,which clearly point to the credit card segment as being one of the largest contributors of loss today.

    January 2020 WebPage Laurent Birade, David Fieldhouse

    Concerned With Forecast Uncertainty in CECL? Look Beyond the Baseline

    Using multiple scenarios in CECL can temper some of the volatility in the economic forecasts – the part that results from our inability to forecast the economy with complete precision.


    Will CECL Ultimately Be Worth All the Fuss?

    The industry is currently a hive of CECL-related activity. Many banks are busily testing their systems or finalizing their preparations for the go-live date, which is either in January 2020 or somewhat later, depending on the organization. Some are still making plans for implementation, and the rest are worried that they should be.

    August 2019 Pdf Dr. Tony Hughes

    Reasonable and Supportable Forecasts - From Principles to Practice

    With many of the larger SEC filers well ahead in their CECL preparations and gearing up for validation, we examine how the requirements of an R&S forecast and reversion may be interpreted.


    CECL, IFRS 9 and the Demand for Forecast Stability

    Loan-loss provisioning models must take a variety of economic and client factors into account, but, with the right approach, banks can develop sensible loss forecasts that are more accurate and less susceptible to volatility.

    June 2019 WebPage Dr. Tony Hughes

    Leveraging Historical Loss Data for CECL

    This paper explores the CECL standard's background, the choices community banks, regional banks, and credit unions face, and some suggested approaches for dealing with these challenges.

    June 2019 WebPage Laurent Birade, Dr. Yashan Wang, Warren Xu

    Defining Economic Scenarios With Constant Severities

    Alternative economic scenarios are invaluable for quantifying and managing forecast risk. In this article, we define these constant severity scenarios and the models used to estimate their probabilities.


    Reporting and CECL: A Seismic Shift for Accountants

    From an accounting standpoint, the changes in how to account for credit-loss reserves within the banking, insurance, and lending industries stemming from the Financial Accounting Standards Board's (FASB) current expected credit losses (CECL) guidance are significant.

    May 2019 WebPage Scott Dietz

    Podcast: CECL – New Accounting Standard and Its Impact on Community Banks

    Moody's Analytics Director Robby Holditch recently visited the Barret School of Banking to discuss the upcoming current expected credit loss (CECL) accounting standard and its ramifications for the community banking space.

    May 2019 WebPage

    Earnings Volatility, Share Price Performance, and Credit Portfolio Management Under CECL and IFRS 9

    This paper studies how earnings volatility induced by credit risk can impact share price performance for financial institutions under CECL and IFRS 9, and quantifies the benefit of an active credit risk management practice.

    April 2019 WebPage Dr. Amnon Levy, Xuan Liang, Pierre Xu

    Finding a CECL Solution for Smaller Banks

    Good-quality CECL projections can be developed using high-quality data that is available free of charge.

    April 2019 Pdf Dr. Tony Hughes

    A Framework for Disclosing Period-over-Period CECL-Estimate Changes

    While many institutions are currently in the throes of implementing the current expected credit loss (CECL) accounting standard, some are thinking ahead and some that are not. CECL will have an unavoidable impact on management disclosures, specifically around explaining period-over-period changes in allowance.

    March 2019 WebPage Laurent Birade

    Chartis Research | Moody's Analytics Credit Risk Vendor Analysis Report

    Moody's Analytics provides financial intelligence and analytical tools supported by risk expertise, expansive information resources, and the application of new technology. Its solutions, made up of research, data, software and professional services, are assembled with the aim of delivering a seamless customer experience.

    February 2019 Pdf

    Moody's Analytics Wins the Strategy Category Award in the 2019 Chartis RiskTech100®

    Winning a game of chess requires strategy and tactics, seeing where the game will go next and making deft, skilful moves accordingly. The winners in the RiskTech100 ® awards are vendors thinking like grand masters, succeeding with decision-making and looking into the future to unlock opportunities.

    February 2019 WebPage

    CECL Is In Trouble, But There's A Fix

    If CECL is to be rethought with this aim in mind, policymakers should learn from successful countercyclical features in the economy and design the new loan loss accounting system accordingly.

    January 2019 Pdf Dr. Tony Hughes

    Moody's Analytics Wins the CECL Category Award in the 2019 Chartis RiskTech100®

    Moody's Analytics Wins CECL Category Award in 2019 Chartis RiskTech100

    January 2019 WebPage

    Modeling Credit Card Losses Under CECL

    Through this study, we illustrate the challenges for modelers under CECL and assess the impact of the new accounting standards.

    January 2019 Pdf David Fieldhouse

    Gauging CECL Cyclicality

    In this paper, we provide empirical support for the conclusion that the CECL standard will be less procyclical than the incurred loss standard.

    December 2018 Pdf Mark Zandi, Cristian deRitis

    CECL Roundtable FAQs

    In light of the Current Expected Credit Loss accounting standard to be issued by the Federal Accounting Standards Board, Moody's Analytics hosted a CECL Economic Scenario roundtable. The objective was to have an open dialogue around economic forecasting techniques for calculating life-of-loan expected credit losses

    November 2018 WebPage

    Auto Stabilizers, CECL and IFRS 9

    IFRS 9 and CECL were designed with two outcomes in mind: to ensure sufficient reserves on the eve of a recession and to prevent restricted lending from curtailing a nascent recovery.

    October 2018 Pdf Dr. Tony Hughes

    CECL: Credit Cards and Lifetime Estimation - A Reasonable Approach

    Many institutions are struggling to apply the CECL standard as it pertains to credit cards, and in particular determining the lifetime value for credit card portfolios. In this paper, we explore the different approaches to evaluating lifetime estimates for the credit card portfolio.

    September 2018 WebPage Laurent Birade

    CECL Impact on Credit Loss Allowances for U.S. Auto Loans

    This paper examines the impact of adopting current expected credit loss (CECL) standards for U.S. auto lenders. We use a dataset of national retail auto loans to illustrate potential changes in model-based allowances across the industry. Our analysis shows that on the first day of CECL adoption, loss allowances for U.S. auto lenders could increase by as much as 1.5 to 2.5 times the current allowances.

    September 2018 Pdf Moody's Analytics

    Mean Reversion in CECL: The What and the How

    Mean reversion is an important facet of the upcoming Current Expected Credit Loss accounting standard. Under CECL, lenders will need to estimate, and set aside an allowance for, the expected lifetime loss for each loan they book at the time of origination.

    September 2018 WebPage Dr. Sohini Chowdhury, Cristian deRitis

    To Follow the Pack or Not: CECL Based on the Consensus

    One of the key differentiators between the upcoming Current Expected Credit Loss and the current incurred loss accounting process is the formal incorporation of forward-looking forecast information.

    September 2018 WebPage Dr. Sohini Chowdhury

    CECLnomics and the Promise of Countercyclical Loss Accounting

    Historically, accounting regulations have not served as regulatory tools in bank examiners' toolkits. Economic capital calculations, leverage ratios, and stress tests are used to assess capital adequacy, while the primary purpose of financial statements has been to inform investors of the recent performance

    September 2018 WebPage Cristian deRitis

    Assigning Probabilities to Macroeconomic Alternative Scenarios

    Both the IFRS 9 and CECL accounting standards move from an incurred loss impairment model to a forward-looking framework that requires banks to calculate lifetime expected credit losses.

    September 2018 WebPage Stephen Ciccarella

    How Will CECL Perform in a Typical Recession?

    I watched The Big Short for the umpteenth time the other day. Watching the film, a young credit analyst may wonder how we could have been so collectively stupid. The monumental boom and bust was built on a single unsupportable premise: that house prices can never fall in a sustained manner at anything other than a local level. The subprime crisis simply pulverized this myth.

    August 2018 Pdf Dr. Tony Hughes
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