Sometimes it’s part of a discussion about preparedness for the Financial Accounting Standards Board’s proposal for managing Current and Expected Credit Loss. In other cases it’s raised when talking through a more proactive method of risk management under existing regulations. However the topic of accessing and analyzing “loan-level data” to better understand loan risks repeatedly pops up during our discussions with banks and lending institutions alike.
Credit unions face a distinct challenge when trying to look at loan-level data in that, generally, their borrower data is kept in a number of different core processing or decisioning systems, which makes it harder to gather into one place. CUs also typically have fewer employees who are able to focus on data management than their bank counterparts.
Credit unions can gather loan-level data using one a number of methods.
For CECL specifically, it’s likely that a credit union will require “life of loan” data to support the forward-looking calculations. A way to capture this information is by using a “limited method,” where the bank uses data already kept in its core and decisioning system(s). Often these systems store data for approximately 13 months. While this method provides a start, 13 months of information might be limiting when the institution is attempting to distill life-of-loan insights.