Global risk and information solutions provider, TransUnion, is partnering with EXL, an operations management and analytics company to create a turnkey current expected credit loss (CECL) solution. The new technology solution will allow lenders to seamlessly comply with the new CECL accounting rule.
Through the partnership, TransUnion is creating a CECL Credit Loss CalculatorSM to provide lenders with a turnkey solution to calculate loss forecasts in compliance with CECL. The product is an intuitive, easy-to-use platform that adheres to all estimation and reporting guidelines on CECL, TransUnion said in a statement.
Issued by the Financial Accounting Standards Board (FASB), CECL will change the methodology used by financial institutions in calculating the allowance for loan losses. The rule is applicable to all lenders and goes into effect in 2020 for SEC filers and 2021 for non-SEC filers.
“Many players in the industry are describing CECL as the biggest change to bank accounting standards in years,” said Jason Laky, SVP and Consumer Lending Business Leader at TransUnion. “While large banks have more resources at their disposal to adapt, we believe the majority of small to mid-sized lenders will not have the ability or capacity to comply internally and may face challenges as they prepare for the rollout of this new rule.”
The combined TransUnion and EXL solution allows lenders to use their own portfolio data, or automatically import TransUnion-reported data, and adjust for macroeconomic scenarios through a series of customizable models. Based on business expectations, lenders may apply overlays and adjust the models across all credit products, including personal loans, auto loans, HELOCs, and mortgages as well as revolving credit products such as credit cards.
“The compliance nature of CECL brings pressure to lenders to have a CECL-ready plan in advance of the rule’s effective date,” said Ankor Rai, SVP and Global Co-Head of EXL Analytics. “We are pleased to partner with TransUnion to deliver a cutting-edge technology solution that will meet the needs of a variety of lenders as they prepare for the unique challenges associated with CECL.”