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The CECL Journey: Steps to Meeting the New Standard

CECL is really happening according to the NCUA’s recent exam guidelines, but some credit unions haven’t started their CECL journey.

 Not sure where to start? Accolade has prepared a timeline to help you breakdown the daunting task into easy to follow quarterly milestones.

The First Steps

The first quarter is the learning phase. Spend January simply learning about CECL so that you are familiar with the different methodologies.

Discounted cash flow? Probability of default? Loss mitigation? There are pros and cons to each method but you need to fully understand them. Register for Accolade’s upcoming webinar: Which CECL model is right for you? Register Here


By March, you should be able to select which method will be the best fit for your credit union.

This phase includes asking important questions about your credit union’s capabilities, as factors such as time, data, and goals can impact which method and solution you choose. Things to consider are:

  • What data do you have available?
    • Is your loan data regularly updated with changing credit scores, asset values, etc at the loan level?
  • How much time do you have to commit to CECL?
    • Is your staff able to manage the task or will you need to outsource?
  • What is your goal with CECL?
    • Are you just trying to meet the standard, or do you want to gain insight into your loan portfolio?
  • What is your budget?

Second Quarter

During the second quarter you can begin to explore solutions that provide a calculation based on your chosen method and the capabilities or limitations you identified. CECL vendors are offering every type of solution you can think of-downloadable spreadsheets, robust software, web-based solutions, etc. In April, you should be reaching out to these vendors to see demonstrations or start testing.

While testing solutions is preferable, it’s not always feasible. When your only option is a demo, come prepared with questions and bring additional staff to the table for more feedback. Plan on exploring a minimum of two solutions so you can use comparisons to hep guide your decision.

In June, start preparing for your board, ALCO, and leadership training. You will need to have these ready by the start of the next quarter to get your whole team on the same page.

Ramping Up

In July, the start of third quarter, you should finalize all demos and trials to determine which solution you will implement. This is also the best time to execute those trainings. In August, meet with your auditors and get their feedback on the solution you chose. You may need to create an additional project timeline if your solution requires things like IT support, training, onboarding new staff, or extensive data scrubbing. Begin to outline that project timeline now with the first steps occurring in September.

Final Stretch

By the fourth quarter you should expect to be well into the implementation process with your new solution. Once the implementation is complete, in October or November, start running the incurred and CECL methods in parallel. By the end of the quarter, make sure you know what your one-time adjustment will be.

CECL doesn’t have to be intimidating. Contact Accolade to learn more about our CECL solutions.  


Article by Aaron Shaner, ALM and Loan Product Manager

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