THC Blog - Three Reasons Why CECL is a Business Solution and not Just an Accounting Number

Three Reasons Why CECL is a Business Solution and not Just an Accounting Number
Most bankers have considered CECL as simply a change in accounting, yet, CECL must be viewed as a business solution. The FASB Staff Recommends that bankers "...approach CECL implementation as a business solution" and "... to implement CECL in a more thoughtful manner." (Board member R. Harold Schroeder 7/2019)

The Problem

CECL requires a holistic implementation approach. Ad hoc assumptions without robust justification will result in additional complexities affecting multiple operational processes. The reason for this fundamental change is the adoption of the Life-of-Loan concept, a forward-looking approach. Forward-looking economic-financial models must meet the well-established regulatory framework that includes guidelines for specifying model assumptions and model risk management. 
1. Enhance Lending Profitability
CECL will impact community bank credit risk significantly. THC's Lambda λ Report, which has a fully integrated interest rate and credit risks model, allowing our clients to evaluate loan profitability with both interest rate and credit risk combined. This, in turn, allows for optimization of loan offer rates by product to enhance profitability.

2. Identify Profitable  Opportunities
Quickly and efficiently identify sources of profitability to optimize resource allocation and boost performance across revenue drivers.  

3. Improve Operational Efficiency
Our integrated approach breaks down the silos inherent today to enable ALCO, Credit, Lending, and Accounting to collaborate and make decisions more effectively and efficiently.

In Summary

By considering CECL as a business solution for your institution, rather than a requirement that is being imposed, CECL can take your institution to the next level and beyond.
If you are interested to see how THC's CECL solution can help you and your financial institution get to the next level please reach out to us at 269-275-3720 or email us at
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