Ardmore & Fintellix Prepare To Enable Smooth Transition

  • Regulatory Standards
  • 18.11.2015 00:00 am

The Financial Accounting Standards Board (FASB) voted last week to finalize the effective date of its proposed regulations on measuring loan-loss reserves. The sweeping regulations will require a forward-looking “expected loss” (CECL) approach instead of the “incurred loss” approach effective today. For public businesses entities (PBE) that meet the definition of an SEC filer, the final standard will be applicable from December 15, 2018, including interim periods. For non SEC filer PBEs & other entities, the guidance will be applicable from December 15, 2019 and December 15, 2020, including interim periods, respectively.

During the discussion, FASB members also accepted a staff recommendation to amend the proposed standard on troubled debt restructurings (TDRs). Earlier version of guidance would have mandated a cost basis adjustment made upon a TDR, but post review the credit losses upon TDR would be measured using CECL Models only. The board also approved the final effective timelines for the new standards on Classification & Measurement and Leases, aligning it with CECL for a “Big Bang” adoption, to help banks manage changes and costs better.

FASB Chairman, Russell G. Golden noted, “The upcoming standards on the recognition and measurement of financial instruments and credit losses will bring greater transparency to financial statements”. The board plans to discuss remaining issues at the November 23rd meeting and the final guidelines on CECL are expected to be published in early 2016.

Ardmore and Fintellix have been working behind the scenes to help Community Banks prepare for CECL, undertaking projects such as “Cost impact of CECL study” at the Bank of Lancaster, VA. Through the study, the Ardmore Fintellix team helped the bank understand various components of cost and also produced a tool to help banks of various sizes compute the cost impact of CECL.

Following the study, Deb Evans, CFO of Bank of Lancaster, Kilmarnock, VA said, “The Ardmore Fintellix team really knows their CECL stuff. Not only are they a pleasure to work with, but I was impressed with their 'quant' abilities and the process even helped me learn more about the capabilities of my bank's core system to address the data needs of CECL”.

In a comprehensive 2-part webinar series titled ‘CECL Guidelines Facts Round-up’, Ardmore & Fintellix will be discussing outcomes of FASB’s 11th November meeting, illustrating the impact of the decisions taken during the meeting on the calculation methodologies in various scenarios (TDR, AFS etc.) as well as talking through the open items on the guidelines which are expected to be finalized during the upcoming meeting on 23 November. The 2-part webinar series is scheduled for 20th November and 1st December.

These developments are part of a wave of standardization of banking supervision across the banking industry globally, especially considering enhanced financial reporting, risk measurement and management. These initiatives have been steadily expanding the regulatory burden on community banks and increasing the cost of regulatory compliance. The Ardmore - Fintellix alliance addresses the need for a comprehensive solution that can help community banks and credit unions more easily manage their regulatory compliance needs, and enable bank management to focus on business growth and profitability.

The Ardmore Fintellix partnership delivers a unique ‘local/global’ alliance that combines global expertise, local experience, and next generation technology solutions to lower the cost of compliance for community banks and credit unions. Through this alliance, US financial institutions have the advantage of a CECL-ready ALLL solution powered by a comprehensive credit data warehouse delivered through a pay-as-you-go Software as a Service (SaaS). Ardmore’s seasoned community bank credit professionals ensure that the ALLL solution is tailored for each bank’s specific needs and business model.

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