by Dr Thomas J Healy, CMB

CECL Made Easy

Thursday, November 3, 2022

Level1Analytics has been hard at work to make CECL easy for you. Our model allows for either of the following methods in calculating your Allowance for Credit Losses (ACL):

Loss Rate (WARM method):

Based on historical losses adjusted for expected changes in credit quality over the Weighted Average Remaining Maturity (WARM) of the loans.

PD/LGD/EAD (Roll-Rate method):

L1A's proprietary migration model calculates:

  • The Probability of each loan defaulting (PD)
  • The Loss Given such a Default (LD) at the Expected Time of Default (EAD)
  • The product of PD x LGD is the expected loss on each loan

All loss estimates are done at the loan level and are based on monthly cash flows. Start now for your 1/1/23 implementation of ASC-326.

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