CECL and the impact on your portfolio: Impact analysis on products and portfolios under CECL

By Tim Bates, VP, Credit Risk, Chief Credit Officer, BECU

Could you please tell our readers a little bit about yourself, your experience and what your current professional focus is?

I’m the Chief Credit Officer for BECU, an $18 billion credit union based in Seattle, WA.  I’ve been involved in credit risk analytics for my entire career on both the banking and information services, having led various credit risk analytic and modelling functions for firms such as Washington Mutual, Equifax, and Experian.  In my current role, I responsibility for BECU’s credit risk analytics, automated underwriting systems, and credit policy/governance/administration activities.

You will be joining BMO Financial Group and Barclays on a panel discussion titled “CECL and the impact on your portfolio: Impact analysis on products and portfolios under CECL” – what do you believe will be the key talking points amongst the panellists and why?

Not surprisingly, I believe the key talking points among the panellists will focus on the CECL’s impact on longer-duration assets, their profitability, and potential market shifts to account for them.

What impact will CECL have on enterprise and business management?

I think one of the more underappreciated aspects of the impact CECL will have- particularly on small and midsize FIs- is going to be the required investments that are going to need to be made in control environment enhancements supporting the change.   Particularly in the area of modelling controls.

You will also be joining a panel discussion titled “Implementation execution: Progress towards final implementation once framework decisioning is finalized” – What key points will you be bringing to the discussion?

The key points of discussion I plan on making are around the elements surrounding the modelling elements of CECL compliance and that organizations shouldn’t underestimate these.  Things like governance, data, and controls should be given equal importance to quantitative methodology.

How will small FIs have to approach final implementation differently to larger FIs?

Speaking from my own organization’s experience (with ours being a small FI), the most important question we asked ourselves was determining what our objective was in CECL adoption.  This is because there seems to be a lot of difference between a reasonable adoption standard and being best-in-class, and we expect the operational differences could be fairly large.