Our Services
CECL Validation
At Mark H. Smith, Inc., we understand that implementing and maintaining a sound CECL model, solution, and program can be complex and time-consuming. Our expert-led CECL Validation service ensures your credit union is compliant and has a comprehensive and effective CECL model and program.
Enhance Your CECL Program While Checking the Regulatory Box with An Expert Validation.
Ensuring CECL compliance and a sufficiently comprehensive and appropriate CECL program can feel uncertain and overwhelming. Navigating complex regulations, confirming a reasonable and supported model/methodology for calculating expected losses, and ensuring proper oversight and controls require expertise and a comprehensive approach. That’s where Mark H. Smith, Inc. can help. Our CECL Validation Service is designed to ensure this process is sound and regulatory compliant, giving your credit union confidence in its methodology, calculation, and overall program. Our goal is to not only check the regulatory box for you, but to ensure your program is effective and optimal.
01
Expert Guidance & Compliance
Gain peace of mind knowing your CECL policy, procedures, and management oversight align with regulatory expectations and industry best practices.
02
Data Validation & Transparency
We validate your CECL model using regulatory requirements, model/methodology testing, and output analysis, ensuring it produces reliable and reasonable results.
03
Clear, Actionable Insights
Our comprehensive review doesn’t just identify gaps and ensure accuracy—it provides practical best practice advice that helps you refine and strengthen your CECL modeling and management program.
Get the Facts:
MHSI Outsourced vs. In-House Software
Compare cost-effective outsourced solutions with customized in-house software. At MHS we help financial institutions evaluate options based on your unique operational needs, budget constraints, and growth objectives.
Our CECL Validation Includes
We know that CECL compliance can feel like a worrisome regulatory burden, but it doesn’t have to be. Our goal is to turn compliance into confidence by helping you feel assured with your CECL model results and overall program. Our CECL Validation includes:
CECL Policy Review
Every credit union is unique, and your CECL policy should reflect that. We review your current CECL policy to assess its suitability based on your institution’s size, complexity, and loan and investment portfolio. This review includes an assessment of key policy elements. Our goal is to ensure your policy is compliant, practical, scalable, and tailored to your credit union’s CECL needs.
CECL Oversight, Management, & Internal Controls Review
An effective CECL program requires strong oversight, management, and well-defined controls. We evaluate the governance framework surrounding your CECL modeling, ensuring your program is:
- Comprehensive and Effective: The management process is sound, complete, and accomplishes objectives. From the top down, the oversight and governance is well structured and appropriate.
- Consistent and well-documented: Procedures and processes for CECL modeling and management should be comprehensive, clear, repeatable, and well-documented.
- Supported by strong change management reviews and controls: We review how your model’s performance and changes to it are evaluated and handled to ensure accuracy and best practices. This includes periodically assessing modeling assumptions to assess their validity and accuracy.
CECL Measurement & Assumptions Review
A CECL model is only as strong as its methodology, calculations, assumptions and inputs. We take a deep dive into your CECL modeling and measurement process, including:
- Model and Methodology: Does the model and methodology make sense for your credit union’s size, complexity, loan portfolio, and other applicable considerations?
- Portfolio complexity and credit risk assessment : How well does your CECL model account for different risk profiles within your loan and investment portfolios?
- Model inputs and setup : Are the input data files and elements complete (data accuracy and integrity assessment)? Is the model set up correctly to reflect expected behaviors?
- Processing and outputs: Are the model’s calculations correct mathematically, and is the methodology correct based on industry comparable models/methodologies? Are the output results comprehensive and sufficiently detailed for a proper assessment and results utilization?
- Assumption review and assessment : We evaluate key assumptions in your CECL methodology, ensuring they are reasonably representative, defensible, and aligned with industry standards.
- Qualitative and Environmental Factor adjustments (Q&Es) : We assess Q&E adjustments including the process and Q&E validity. This includes ensuring sufficient documentation and support.
- Off-balance-sheet CECL requirements : These often overlooked exposures need to be determined and modeled in accordance with regulatory requirements. This includes evaluating assumptions and other characteristics to ensure their reasonableness and compliance with regulatory requirements.
- Investments : An assessment of CECL requirements pertaining to the investment portfolio and the modeling/methodology incorporated to calculate CECL for credit exposures in the investment portfolio. This includes a review of the practice relative to regulatory requirements and guidance.
Back-Testing CECL Results
We conduct a back-test using actual historical losses relative to CECL model expected losses for the same time period. This includes a variance analysis to assess discrepancies and potentially aid in refining modeling accuracy. This can be a key assessment to your CECL modeling accuracy that will aid in refinements to ensure the most accurate results are obtained from the model and process.
Reporting & Recommendations
A comprehensive preliminary report will be provided to you with recommendations and best practice considerations with an available consultation to assess the results and address any identified action items.
- An easy-to-understand assessment of your CECL model and program’s strengths and weaknesses
- Actionable recommendations and best practice considerations to refine and enhance your approach
- Clear explanations and consultation for any required or suggested changes
- Credit union input into the final report
- Regulatory box checked!
The engagement includes an optional teleconference exit review, during which we walk your team through our findings, answer questions, and discuss the next steps at no additional cost. We want you to walk away with a CECL model and program that is regulatory compliant, accurate, and optimal for your credit union.
Why Credit Unions Trust Us
Personalized Service & Support
Think of us as your dedicated ALM specialist, always just a call away. We understand every credit union is unique, which is why we tailor our solutions to your specific needs, providing personalized support as if you had an expert on staff.
Results-Driven Solutions
Our approach delivers measurable value through customized solutions, not one-size-fits-all services. We're known industry-wide for going beyond expectations to help credit unions achieve their financial management goals.
Your Credit Union Specialists
We've exclusively served credit unions for over 40 years, giving us unmatched understanding of your unique challenges. Our ALM validation acknowledges that your IRR management program should match your size, complexity, and risk profile.
Ready to Strengthen Your Credit Union’s Financial Strategy?
Gain clarity and confidence with expert ALM insights, regulatory support, and data-driven decision-making. Let’s discuss how our solutions can support your institution’s success.
FAQ
Questions? We’ve got answers.
Looking for more information? Visit our FAQ page for answers to common questions, or feel free to contact us below if you need further assistance. We’re here to help!
