ABA Banking Journal - September/October 2017 - 40

FEATURE

> ACCOUNTING

The CECL
Ripple Effect
BY JULIE KNUDSON

ith the Current Expected Credit Loss standard
for loan loss accounting set to go into effect
starting in 2020 for SEC registrants (and in
2021 for all other banks), financial institutions
still have time to consider where CECL's ripples
will appear across their operational areas. Better integration
between functions such as accounting, risk management
and data analysis is just one of several priorities emerging
as CECL's effective date draws closer. For institutions looking
to get ahead of the curve, data management may rise to the
top as a near-horizon priority.

Data retention, storage take center stage
Banks already possess much of the data covered under
CECL. But whether it's housed in the right system or saved
in the right form-or whether it's available at all-needs
to evaluated.
"The systems and the collection of data that a bank would
use to measure credit risk either doesn't exist, or it's been
written over or, in many cases, it's been purged," explains
ABA SVP Michael Gullette, the association's lead expert on
CECL. Information may have originally been gathered and
used for loan underwriting, for example, but not for overall
analysis of portfolio risk. These data sets likely weren't
subjected to the strict quality oversight that will now be
expected under CECL. "You have to track those things you
did during your underwriting process, which never had

those controls," Gullette says of existing data. Information
integrity is one area that will become key as banks make
their data ready for CECL review.
Jim Rives, senior director at FTI Consulting in Washington,
D.C., says he sees CECL's implementation as an opportunity
to get banks' data management houses in order. "As we
look at the entire credit lifecycle, from underwriting through
loss mitigation, a lot of times banks of all sizes have very
disparate data repositories and applications," he explains.
To a large degree, CECL will require institutions to bring
those standalone platforms into a more holistic, connected
grouping. "It's really about having the various systems talk
to each other," Rives says. Risk rating platforms illustrate
this point. They may be housed within a bank's core system
but sometimes they're simply an Excel spreadsheet on
a desktop computer. By pulling everything together in
advance of CECL, Rives says organizations will have better
insight into where data gaps and duplication exist.
Banks should also consider that historical information takes
on new life once CECL's requirements go live. "Think of a
simple instrument like a mortgage, which is typically 25 or
30 years," says Jimmy Yang, managing director of credit
and operational risk analytics at the Bank of Montreal's U.S.
headquarters in Chicago. "The lifetime losses for a 30-year
note are much more difficult to evaluate without data to
back it up." Some banks don't have the look-back data that

To a large degree, CECL will require institutions to bring standalone
platforms into a more holistic, connected grouping.
40

ABA BANKING JOURNAL | SEPTEMBER/OCTOBER 2017



Table of Contents for the Digital Edition of ABA Banking Journal - September/October 2017

CHAIRMAN’S VIEW
UPFRONT
PICTURE THIS
LEGAL BRIEFS
POWER UP PROFILE
THE TOP FINTECH TRENDS DRIVING THE NEXT DECADE
PLUG AND PLAY: FOUR WAYS TO LEVEL UP YOUR MOBILE BANKING APP
MAKING FRIENDS WITH FINTECH
LOOKING AT FINTECH THROUGH THE LEGISLATIVE LENS
LET’S TALK PAYMENTS
IS OUTSOURCING IT SECURITY RIGHT FOR YOUR BANK?
THE CECL RIPPLE EFFECT
FROM YOUNG AMERICANS TO ENTREPRENEURIAL CITIZENS
FINDING THE PERFECT NICHE
THREE ELEMENTS OF BANK LEADERSHIP
REAL ESTATE LENDING
ABA COMPLIANCE CENTER INBOX
WEALTH MANAGEMENT
FROM THE STATES
CORPORATE SOCIAL RESPONSIBILITY
INDEX OF ADVERTISERS
FROM THE VAULT
ABA Banking Journal - September/October 2017 - Intro
ABA Banking Journal - September/October 2017 - bellyband1
ABA Banking Journal - September/October 2017 - bellyband2
ABA Banking Journal - September/October 2017 - cover1
ABA Banking Journal - September/October 2017 - cover2
ABA Banking Journal - September/October 2017 - 3
ABA Banking Journal - September/October 2017 - 4
ABA Banking Journal - September/October 2017 - 5
ABA Banking Journal - September/October 2017 - 6
ABA Banking Journal - September/October 2017 - 7
ABA Banking Journal - September/October 2017 - CHAIRMAN’S VIEW
ABA Banking Journal - September/October 2017 - 9
ABA Banking Journal - September/October 2017 - 10
ABA Banking Journal - September/October 2017 - UPFRONT
ABA Banking Journal - September/October 2017 - 12
ABA Banking Journal - September/October 2017 - 13
ABA Banking Journal - September/October 2017 - 14
ABA Banking Journal - September/October 2017 - 15
ABA Banking Journal - September/October 2017 - PICTURE THIS
ABA Banking Journal - September/October 2017 - 17
ABA Banking Journal - September/October 2017 - LEGAL BRIEFS
ABA Banking Journal - September/October 2017 - 19
ABA Banking Journal - September/October 2017 - POWER UP PROFILE
ABA Banking Journal - September/October 2017 - 21
ABA Banking Journal - September/October 2017 - THE TOP FINTECH TRENDS DRIVING THE NEXT DECADE
ABA Banking Journal - September/October 2017 - 23
ABA Banking Journal - September/October 2017 - 24
ABA Banking Journal - September/October 2017 - 25
ABA Banking Journal - September/October 2017 - 26
ABA Banking Journal - September/October 2017 - 27
ABA Banking Journal - September/October 2017 - PLUG AND PLAY: FOUR WAYS TO LEVEL UP YOUR MOBILE BANKING APP
ABA Banking Journal - September/October 2017 - 29
ABA Banking Journal - September/October 2017 - 30
ABA Banking Journal - September/October 2017 - 31
ABA Banking Journal - September/October 2017 - MAKING FRIENDS WITH FINTECH
ABA Banking Journal - September/October 2017 - 33
ABA Banking Journal - September/October 2017 - LOOKING AT FINTECH THROUGH THE LEGISLATIVE LENS
ABA Banking Journal - September/October 2017 - 35
ABA Banking Journal - September/October 2017 - LET’S TALK PAYMENTS
ABA Banking Journal - September/October 2017 - 37
ABA Banking Journal - September/October 2017 - 38
ABA Banking Journal - September/October 2017 - IS OUTSOURCING IT SECURITY RIGHT FOR YOUR BANK?
ABA Banking Journal - September/October 2017 - THE CECL RIPPLE EFFECT
ABA Banking Journal - September/October 2017 - 41
ABA Banking Journal - September/October 2017 - 42
ABA Banking Journal - September/October 2017 - FROM YOUNG AMERICANS TO ENTREPRENEURIAL CITIZENS
ABA Banking Journal - September/October 2017 - 44
ABA Banking Journal - September/October 2017 - 45
ABA Banking Journal - September/October 2017 - 46
ABA Banking Journal - September/October 2017 - FINDING THE PERFECT NICHE
ABA Banking Journal - September/October 2017 - 48
ABA Banking Journal - September/October 2017 - 49
ABA Banking Journal - September/October 2017 - 50
ABA Banking Journal - September/October 2017 - THREE ELEMENTS OF BANK LEADERSHIP
ABA Banking Journal - September/October 2017 - 52
ABA Banking Journal - September/October 2017 - 53
ABA Banking Journal - September/October 2017 - REAL ESTATE LENDING
ABA Banking Journal - September/October 2017 - 55
ABA Banking Journal - September/October 2017 - 56
ABA Banking Journal - September/October 2017 - 57
ABA Banking Journal - September/October 2017 - 58
ABA Banking Journal - September/October 2017 - 59
ABA Banking Journal - September/October 2017 - ABA COMPLIANCE CENTER INBOX
ABA Banking Journal - September/October 2017 - 61
ABA Banking Journal - September/October 2017 - WEALTH MANAGEMENT
ABA Banking Journal - September/October 2017 - FROM THE STATES
ABA Banking Journal - September/October 2017 - CORPORATE SOCIAL RESPONSIBILITY
ABA Banking Journal - September/October 2017 - INDEX OF ADVERTISERS
ABA Banking Journal - September/October 2017 - FROM THE VAULT
ABA Banking Journal - September/October 2017 - cover3
ABA Banking Journal - September/October 2017 - cover4
ABA Banking Journal - September/October 2017 - outsert1
ABA Banking Journal - September/October 2017 - outsert2
ABA Banking Journal - September/October 2017 - outsert3
ABA Banking Journal - September/October 2017 - outsert4
ABA Banking Journal - September/October 2017 - outsert5
ABA Banking Journal - September/October 2017 - outsert6
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