Model validation tool enables CECL testing and analysis for financial institutions

CHICAGO (February 27, 2019) — A new accounting standard will require financial institutions to change the way they estimate and report allowance for credit losses (ACL) using the current expected credit loss (CECL) model. To assist with validation, Crowe has introduced Crowe Credit360 for CECL, a technology-enabled model validation solution that pairs the firm’s extensive model validation and CECL advisory expertise to provide comprehensive testing and analysis. Crowe is a public accounting, consulting and technology firm with offices around the world.

The Financial Accounting Standards Board (FASB) issued the credit losses standard in 2016. The standard requires recording life-of-loan credit loss estimates for financial assets held at amortized cost. Lenders will need to aggregate loans by similar risk characteristics, adapt models to estimate lifetime credit losses on the portfolio segments and adjust their historical losses for differences between the current and forecasted conditions. The Crowe solution is designed to appropriately validate and effectively challenge the complex and data-intensive models used by lenders to estimate expected losses. 

Crowe Credit360 for CECL enables Crowe validation professionals to:

• Effectively challenge the institution’s CECL model through sensitivity analysis, back testing and alternative model comparisons
• Identify data quality concerns
• Assess portfolio risks and concentrations with comprehensive portfolio analytics
• Identify pricing discrepancies relative to the asset risk profile
• Create efficiencies in subsequent years’ testing by leveraging the technology and historic data provided for year-over-year comparisons, expedited data validation and monitoring for data overrides

“Under the new standard, the way financial institutions quantify risk is dramatically different, and many institutions are finding they need to manage robust loan-level data sets to formulate their ACL estimates,” said Chad Kellar, Crowe advisory services partner. “Crowe Credit360 for CECL provides the ability to manage large amounts of data, identify portfolio risks and effectively challenge both individual assumptions and the models as a whole, which is integral to performing model validations for those subject to the model risk management supervisory guidance.”

Crowe Credit360 for CECL joins the existing Crowe Credit360 suite of solutions. The five modules in the Crowe Credit360 suite provide financial institutions with software solutions that help them leverage data to improve in different areas of credit risk management. As a whole, the suite can also analyze the intricate relationships existing in credit risk to help a financial institution better manage all elements of modern credit risk.

To learn more and see a demonstration video, visit Crowe Credit360 for CECL.

About Crowe
Crowe LLP (www.crowe.com) is a public accounting, consulting and technology firm with offices around the world. Crowe uses its deep industry expertise to provide audit services to public and private entities. The firm and its subsidiaries also help clients make smart decisions that lead to lasting value with its tax, advisory, risk and performance services. Crowe is recognized by many organizations as one of the best places to work in the U.S. As an independent member of Crowe Global, one of the largest global accounting networks in the world, Crowe serves clients worldwide. The network consists of more than 200 independent accounting and advisory services firms in more than 130 countries around the world.