Pub. 2 2021 Issue 4

17 ISSUE 4 | 2021 technology and others. Additionally, CECL affects all entities holding loans, debt securities, trade receivables and off- balance-sheet credit exposures. In short, it will have significant implications for operations at most financial institutions. How to proceed toward CECL transition The time to get started — if you have not already — is now. This is a significant change with extensive effects and potential risks. Careful — and early — planning is critical. Here are nine key steps institutions can take to take to achieve CECL compliance: 1. Identify functional areas (such as lending, credit review, audit, management, and board) that need to participate in the transition project/implementation and ensure those working in these areas are familiar with the new standard 2. Determine your effective date and whether to adopt early 3. Make a project plan and timeline 4. Discuss the plan and progress with all stakeholders as well as your regulator 5. Determine the ACL estimation method/methods that may be used 6. Identify available data and any other data that may be needed 7. Identify potential system changes 8. Evaluate and plan for the potential impact on regulatory capital 9. Have a straightforward, well-understood process Contact us for a complimentary and confidential risk management consultation 866.825.6793 or riskmsg.com. RMSG is a wholly-owned subsidiary of Bankers Healthcare Group. To learn more about RMSG, visit riskmsg.com . Finally, it’s necessary to take a holistic view to ensure a smooth transition, including: • Built-in testing for data integrity and method estimation validation • Update other bank policies and reports so they are consistent with processes • Consider running parallel with the ALLL to evaluate risks • Back-test as part of supporting modifications and improvements What are the implementation timelines? This standard was effective for many institutions by Dec. 2019, and all others will need to comply by March 2023. These dates are based on the Public Business Entity (PBE) status for institutions. Early adoption was allowed for any institution after Dec. 2018. 