TransUnion has partnered with EXL to help lenders comply with the new Current Expected Credit Loss (CECL) accounting rule.
The credit reporting agency and risk solutions provider said the partnership with EXL will allow it to create a CECL Credit Loss Calculator, which will provide lenders with a turnkey solution to calculate loss forecasts in compliance with CECL.
EXL’s analytics capabilities will be combined with TransUnion’s de-personalised credit data to create a platform that complies with all CECL reporting guidelines, which alter how banks calculate loan loss.
“Many players in the industry are describing CECL as the biggest change to bank accounting standards in years,” said Jason Laky, senior vice president 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.”
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.
It requires financial institutions to consider future conditions that may affect estimations of credit losses, in addition to past and current events. Implementation will introduce several key accounting modifications that require significantly more data and a deeper level of modeling, analysis and reporting.
The 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 customisable models. 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.
Founded in 1968, TransUnion is headquartered in Chicago, Illinois with office locations in Hong Kong, Mumbai, Toronto, Johannesburg, Colombia, and Brazil. The company enables businesses to acquire new customers, assess consumer ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud.
Earlier this month, EXL, a operations management and analytics company, has launched the global rollout of a digital Know Your Customer (KYC) solution. HSBC recently commissioned EXL to develop the solution to improve the efficiency of KYC processes, lower the cost of compliance and ultimately improve end customer satisfaction.
Copyright © 2018 RegTech Analyst
Copyright © 2018 RegTech Analyst
