Despite COVID, the economic crisis and several attempts to have CECL delayed further, CECL will still be effective for credit unions on Jan. 1, 2023. That seems a long way off, and you might be tempted to ignore CECL for the time being. However, many institutions that are already required to comply have stated they wish they had started the process earlier. Many would argue that the economic crisis and the potential for increased charge offs make CECL more relevant than before.
We hear some common themes in our discussions with Credit Unions and the concerns they have about implementing CECL. There are so many different options that it can be difficult to narrow down what type of solution is best for your credit union. Should you build something in-house or outsource the process? Should you install a software or use Excel?
Here are five questions to ask to help you find your perfect fit for CECL:
- Who on your staff has time to put your CU on the CECL path?
You and your staff all wear more than your share of hats around the office. Your team might not have time to build in-house solutions or commit to lengthy training sessions. You can filter your options by determining how much staff time you can spare to CECL. Below are the time-consuming elements of CECL that you should be mindful of:
- Data scrubbing and formatting
- Vendor onboarding and training
- Building data model
- Updating data files and data model
- Who has the capability to become a CECL expert?
Someone at the Credit Union needs to understand CECL well enough to ensure the calculations are accurate and that you are using the appropriate methodology. If you do not already have someone on staff with this expertise, then you may need to consider hiring or outsourcing.
- What data do you have available?
Will you be able to build a forward-looking model with your existing loan portfolio data? Many credit unions will find that the data requirements for CECL will demand time and/or expertise they do not currently have. Examine your existing data and the types of data you need for CECL. You may need to plan additional resources for cleaning data files, coordinating with vendors, or connecting to an internal data model.
- What is your budget?
Once you know the type of solution that best meets your credit union’s time, expertise, and data limitations you can further narrow down your search with your budget. You’ll find some vendors require a high up-front investment but can serve as your expert, while others may save you money but demand more time.
Accolade Advisory offers CU Clarity to help your Credit Union with all four of those important considerations. It’s an online platform that uses historical and industry data sources to calculate your CECL amount. Click here to learn more about the easy and effective CU Clarity tool.
By Aaron Rouse