CECL

VBC provides a full suite of modeling and validation services to ensure your CECL reserve and modeling process is robust, accurate, and tailored to the specific needs of your institution. Institutions should balance the need for an accounting number with taking into consideration the potential for integrating credit risk into earnings and capital decision making.

Modeling

VBC provides full service CECL modeling (champion and challenger) either at the aggregate position level or at the loan level. Utilizing core system loan portfolio data, our models calculate a reserve that is calibrated, where necessary, to historical institution-specific, peer or national averages for losses. Our modeling process also includes a regression modeling component where correlations between historical losses and economic variables are determined in order to calculate the reserve for the reasonable and supportable forecast period. 

Implementation Consulting

VBC can assist with the transition to CECL life-of-loan modeling requirements. Our services include assessing appropriateness of methodologies, evaluating core system data capabilities and assisting with Excel-based model development, software-based implementations and models developed in programming languages such as Python, R or SAS.

Model Validations

We perform a comprehensive review of methodologies, assumptions, calculations, reporting and governance processes. Our validation experience ranges from simplistic Excel-based models to more complex software models and models developed in languages such as SAS, Python and R. We have experience with modeling methodologies such as discounted cash flow (DCF), PD/LGD, Vintage, and WARM, as well as more sophisticated methodologies such as advanced regression and machine learning techniques. We also place significant emphasis on qualitative adjustment factors and accompanying support analysis and documentation.

Credit Stress Testing

Utilizing loan level detail accompanied by credit risk scoring data, VBC can develop models to run any specified credit stress scenario. These stress tests can be fully integrated with the institution’s loan portfolio and balance sheet reporting.

Case Study: A Unique CECL Modeling Exercise for a Rapidly Growing Consumer Lender