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CECL Checklist

Considering SCALE or WARM CECL models due to perceived cost savings, simplistic modeling, or reduced time investment?

Before settling on a solution that may likely cause more questions, heartburn, and costs, consider the ValuCast proposition…a proven and defendable model with only 8 loan fields, 15 clicks, and 1 hour per quarter. 

Here’s a handy checklist to use:

✅ SSAE/SOC reports.

✅ Complete vendor management package (DR, InfoSec, IT Specs,etc.) and confirm financial stability.

✅ Review CECL Model Documentation.

✅ Minimum of 3 meaningful client references and preferably currently reporting.

✅ Ability to provide your bank with a trial run or proof of concept with your bank data.

✅ CPAs/CFAs/PhDs on staff.

✅ Expertise and staff that have experience and have gone through successful CECL implementations with other clients.

✅ The potential model has a proven track record. i.e., other clients are reporting live, and their auditors/regulators have accepted the model and methodology(s).

✅ Model has been audited and validated by reputable firms.

✅ The potential vendor must have a retention rate of at least 98% among the CECL client base. Make sure you clarify this one with the vendor! In fact, if the vendor has lost a CECL client, it should only be because that client was acquired.

✅ Peer data must be meaningful. Remember, no one has loss history.

✅ Clients that cutover from a competing solution and will serve as a reference.

✅ Software is being maintained and updated – ask for recent releases and product roadmap.

✅ Contains meaningful reporting including external GAAP and Call Reporting.

✅ End-to-End solution. (i.e., prepayment speed calculations, unfunded commitments, Q-Factors, Individually Assessed, etc.)

✅ In essence, as a user, you don’t have to leave the model to perform any piece of your CECL calculation.

✅ “All-in” costs are presented upfront to prevent your bank from being nickeled and dimed. Note licensing vs services so that you are comparing apples to apples.

✅ The potential vendor must provide an implementation timeline example or Gantt chart so you can see implementation details clearly and concisely.

✅ The potential vendor must have an appropriate implementation queue. Thousands of banks are adopting at the same time, so this one is significant. You can’t afford to miss critical deadlines.

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As part of an annual study that began in 2020, Valuant conducts analysis on ASC 326, commonly referred to as “CECL”. The study contains key data statistics and insights around the US Regional and Community Banking sectors and the impact CECL has on their Allowance for Credit Loss (ACL) Coverage Ratios.

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