About CECL validations
CECL validations performed by an industry veteran.
I was in the industry when CECL was introduced in 2010, built a model, and guided credit unions and banks through implementation.
Scope
What a CECL validation covers.
Data Integrity
A review of the loan data flowing into the model, including segmentation decisions, historical loss history, and reconciliation to the balance sheet. This covers whether the data is complete, consistent, and appropriate for the methodology in use.
Model Capabilities
An assessment of whether the model’s methodology is appropriate for the institution’s portfolio composition and complexity. This includes the model’s ability to incorporate economic forecasts, support multiple loss estimation methods, and meet regulatory expectations.
Governance, Policies and Limits
A review of the CECL policy, reserve committee structure, and board oversight. This addresses whether responsibilities are clearly assigned, whether the policy reflects current practice, and whether results receive substantive review.
Assumptions
A review of the assumptions driving the allowance estimate, including loss rates, economic forecasting inputs, and qualitative factor adjustments. The review covers both the reasonableness of each assumption and the support behind it.
Additional Reporting
A review of supporting analyses used alongside the model, including back-testing, sensitivity analysis, and vintage analysis. This covers whether the institution uses these tools to challenge and contextualize its reserve estimate.
Other Considerations
A review of items that fall outside the categories above but affect the reliability of the CECL process. This includes documentation practices, internal responsibility for model maintenance, and the use of model results in financial reporting.
Get in touch
Start a conversation about your next validation.
Tell us about your institution and the model in use. We’ll respond with a fee range and proposed timeline before any work begins.