DS News

12 SAME GREAT SERVICE AND QUALITY. NEW NAME. Asset Valuation & Marketing is now AssetVal APPRAISALS | BPO's | BOV's | RENTAL DATA | AVM'S | INSPECTIONS AssetVal.com | 970-256-6652 | Randy@assetval.com VALUATION SOLUTIONS BANKS STRUGGLE WITH NEW ACCOUNTING STANDARD More than half of banks are in the early stages of implementing the Current Expected Credit Loss (CECL) model, instituted in June of last year. Moody's released findings from a survey examining the measures banks are taking to convert to the new model. e quality versus quantity debate was one of the main focuses of the report, as banks are expected to see numerous challenges to data quality and quantity as well as life-of-loan loss models. According to the report, banks will need to divulge origination and loan information, loss given default information, revolving loans or lines of credit, ongoing changes to credit risk status, portfolio information, and economic data in order to comply with CECL. e report also stated that banks will see fewer challenges surrounding software, calculations, and reporting. e survey found an overwhelming response of banks experiencing challenges in modeling needs. Forward-looking CECL estimates; assumptions, data, statistical, and mathematical methods; materiality; and appropriateness of parameter quantification were listed as four aspects that can be used when developing models for CECL. With more than half of the banks already in early stages of preparation for CECL, Moody's Analytics also foresees smaller banks going through more challenges than larger banks along with increased provisions. Some of the banks said the CECL standard has gotten too complex. One CCAR bank stated, "e CECL standard has gone too far, and current practices, which must now be changed, could have incorporated future events more simply." Others feel as though CECL is not necessary for smaller financial institutions. A private community bank revealed that smaller banks "should have a good handle on their customers and risk levels as a rural community bank," according to the survey. Anna Krayn, Senior Director at Moody's Analytics, explained that although CECL isn't favored among banks, it will ultimately change the way financial institutions protect their assets. "e implementation of CECL poses a range of process and methodological challenges for banks," she said. "It requires an interdisciplinary approach that leverages expertise from credit risk, accounting, treasury, finance, and technology teams. Given the potential impact of CECL on earnings and capital, firms must understand the changes required to transition to the new standard and put implementation plans in place ahead of the launch date." There were a little more than 35,000 new foreclosure filings in November 2016, down 17 percent compared to 2015, according to ATTOM Data Solutions' U.S. Foreclosure Market Report. KNOW THIS

• Cover