Risk Management & Analytics: What five key activities should credit unions be doing in their CECL projects?

What five key activities should credit unions be doing today in their CECL projects?

If credit unions want to stay on track for implementing the Current Expected Credit Loss (CECL) standard, they need to have already completed several milestone tasks and to complete several more by the end of the year. Credit unions also need to be sure they have allocated sufficient time to complete the tasks that need to be finished between 2019 and 2022.

With this in mind, what exactly should be the current focus of credit unions’ CECL project teams? Five key activities will be emphasized today in a 30-minute webinar by MountainView Financial Solutions, a Situs company. The webinar begins at 1 p.m.

The webinar, Credit Union Progress with CECL, translates the results of a recent MountainView survey into practical uses such as timetables and benchmarks, next steps in addressing common challenges, and additional resources credit unions can consider for their unique challenges.

MountainView conducted its online survey May 9 to June 22 and received responses from 142 credit unions nationwide. The survey questions spanned across modeling methodology and models to be used, asset classes to be modeled, data, and use of vendor-provided solutions.

While webinar registrants will see key takeaways from MountainView’s analysis of the answers to each survey question, the webinar will also synthesize overall results into five key activities credit unions should be doing right now.

Click here to register for today’s webinar.

Banks ask Federal Reserve to delay CECL impact on stress testing

U.S. banks are asking the Federal Reserve to wait until 2021 before they require lenders to incorporate the impact of forthcoming accounting changes into their annual stress-test submissions.

Already faced with a potentially large hit to capital from the switch to the Current Expected Credit Loss (CECL) accounting standard, bank lobbyists are calling for a stay of execution, as well as a quantitative impact study (QIS) to determine how CECL will interact with the watchdog’s annual stress-testing program.

Read more: Risk.net

Bank of America says pump the brakes on structured-credit risk

Signals are flashing red in the structured credit market, according to Bank of America.

Credit analysts at the bank are warning that structured credit products are entering a new “risk-off” phase as a number of market indicators imply caution is warranted.

“We turn more defensive on securitized products and underweight on agency” mortgage-backed securities, BofA analysts including Chris Flanagan and Alexander Batchvarov wrote in a note. “Risk-off phase likely has started.”

The diminishing appetite for risk among investors should spill into wider investment-grade corporate spreads. That will likely bleed into higher-rated structured products, such as mortgage-backed securities from Fannie Mae and Freddie Mac. The bank remains neutral across the rest of the sector.

Read more: Bloomberg

Senators’ warning to Federal Reserve: Relief for midsize banks better be real

The recent regulatory relief law narrowed the definition of megabanks in the Federal Reserve’s toughest supervisory tier, but also included a safety valve: The Federal Reserve can still maintain some prudential standards for smaller banks.

But now, lawmakers who advocated for regional banks to escape the Federal Reserve’s reach worry that safety valve could be used too often, leaving institutions that were supposed to be the big winners in regulatory relief still weighed down by the post-crisis regime.

A group of senators, led by Sen. David Perdue, R-GA, is planning to send the central bank a letter outlining their concerns. They will urge the Federal Reserve to stand by the law’s intent of subjecting only banks with systemic importance to the most rigorous supervisory procedures developed after the crisis.

Among their concerns is that the central bank may still apply stress test requirements broadly for banks with assets of $100 billion to $250 billion. In general, they suggested that the Federal Reserve target standards only for certain institutions in that middle tier, rather than viewing that whole category with a single lens.

Read more: American Banker

Can this technology make banks better at spotting money launderers?

IBM wants banks to not just spot crime but also identify criminals.

And to do that, the technology giant is turning to its financial services unit, borrowing predictive analytic techniques originally built to determine, for instance, the likelihood of a customer buying a mortgage.

Instead of relying on more traditional markers, such as demographic detail, address or occupation, customers will be segmented by financial behavior, said Marc Andrews, vice president of Watson Financial Services at IBM.

Customers involved in money laundering, for instance, are deemed more likely to transact or use an ATM at off-hour times of the day. The platform’s profiles to identify criminal behavior are informed by ex-regulators and former bank employees with experience in financial investigation, he said, adding that customer information is constantly being updated.

Read more: American Banker

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