CECL

The New Paradigm for Financial Organizations
Implementing the New Financial Instruments Standard

 

To help prevent or mitigate another financial bank crisis, in June 2016, the Financial Accounting Standards Board (FASB) issued an update on the measurement of allowances for credit losses. FASB is promoting a shift to “current expected credit loss approach” which will now require a threshold to recognize credit losses and will consider the expected loss over the life of the loan.

GDS Link offers a tailored solution that will help you to comply with the new reporting requirements, which, in part, analyzes your organization’s customer records and creates an overview of results, patterns and trends to help you develop and implement new strategies for minimizing risk and optimizing profits.

What Financial Institutions face in regards to CECL

  • Complexity and long and expensive implementation projects.
  • High cost (licenses and consultancy) and demanding deadlines
  • Difficulty of being compliance with the initial objectives.
  • High dependence of suppliers and internal IT
  • Low flexibility and capacity of parameterization
  • Very centralized solutions
  • Lack of a powerful environment for simulation

CECL Implementation Dates

 

  • December 15, 2019: Public business entities that are SEC filers must adopt CECL guidelines for fiscal years beginning after December 15, 2019.
  • December 15, 2020: All other public business entities must adopt CECL guidelines for fiscal years beginning after December 15, 2020.
  • Early adoption is allowed for all entities starting with fiscal years beginning after December 15, 2018.

GDS Link Technology

 

  • Changing the game from being a “cost center” to become some kind of “profit center” unit.
  • Flexible architecture able to adapt easily to different calculation, scenarios, etc.
  • Powerful and user-friendly user interface (drag and drop). Execution of rules defined by the user
  • The technology supports the greatest complexity in the new regulatory environment.
  • Parametrization can be carried out by local units but easily integrated into a corporate environment.
  • Powerful multi-user Simulation environment with multiples scenarios simultaneously.
  • Solution accredited in the market with a great cost-benefit ratio
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1

 

Reporting

 

– Support the output to any internal or third-party reporting tools
– Automated distribution of reports to relevant parties
– All records are stripped of personally identifiable information (PII), to eliminate any invasion of privacy concerns. Each record, however, contains a unique identifier that allows users to drill down back to the original account.
– GDS Link will work with your existing business intelligence and reporting licenses, plus GDS Link will set everything up — and even manage in the cloud, if desired.

2

 

Data Management

 

– Refine/import already built CECL-compliant PD, LGD and EAD models
– Develop new CECL-compliant PD, LGD and EAD models
– Provide an automated link between internal and external data sources (e.g., application, performance, macroeconomic and accounting)
– Perform data validation

3

 

Calculations

 

– Automate the ECL calculation and stage assignment
– Allow segmentation based on user-defined characteristics
– Graphical user interface that shows the logic of the calculation in a way that is visually understandable by non-technical users.
– Perform unlimited horizontal escalation using a scalable and high-performance environment like Apache Spark
– Can run many simulations using different scenarios to assess potential impact on P/L
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ACCESS AND CONTROLS

• Offer multi-user mode to independently and simultaneously enter models and calculation formulas (methodology) and rules (tactical exceptions)
• Provide an audit trail for inputs and history of changes

 

IMPLEMENTATION RULES

• Graphical user interface to configure system
• Segmentation of loan portfolio based on user defined characteristics
• Support for optional calculation of scores
• Support for discounted cash flow methods
• Model-independent, ability to implement various methodologies
• Trees, rulesets, processes and calculations define the full provision assignment logic
• Multicurrency
• Ability to simulate applications on samples or whole portfolios
• Step-by-step calculation to assure the quality of the implementation
• Multiuser
• Security management
• Release management
• High scalability, including Big Data execution environment