Selecting a CECL Partner: 5 Green Flags

Is your CECL vendor getting you down? Switch to Trellance for elevation.

With over half the year gone and Current Expected Credit Losses (CECL) audits looming around the corner, if your credit union hasn’t already found a CECL partner, it’s not too late to find a match – or maybe you’re looking for something more. A CECL partner can help your credit union ensure you’re meeting standards and are audit ready but should also help you leverage what is tantamount to the most important estimate on your balance sheet for more insights.

In this blog, we’ll explore some green flags to look for when considering a CECL partner for your credit union.

Cost Effective and Value-Added Services

Obviously, your credit union’s budget is going to play a large role in which CECL vendor you choose to partner with. But beyond just ensuring the price tag is in the right range, make sure you’re also looking at how the price of the vendor you’re considering compares with vendors offering a similar service. They should fall within the same range, and, ideally, provide more overall value than the competitors. More value could mean either they provide additional services included in the overall price – such as loan portfolio analysis and more frequent refreshes – or that their service generally performs better. They may even offer to buy you out of your current annual CECL contract, saving you time and money.

One such value-added service is multi-dimensional loan portfolio analysis. Look for vendors who have subject-matter experts to conduct a thorough review of your credit union’s entire loan portfolio and will conduct stress testing, static pool analysis, loss distribution and analyses of significant underwriting characteristics. This level of loan portfolio analysis will help your credit union meet regulatory needs, maximize value, and prepare for and meet the needs of a changing economy – providing insights on opportunities for performance improvement.

If you are a current Trellance data warehouse customer (or are considering becoming one), our CECL solution can be added to provide an even more cost-effective and integrated solution. This will alleviate the need for data integration and vendor due diligence, incorporate our predictive analytics suite and provide a seamless experience for visualizations – all on top of a “single source of truth” platform.

CECL Solutions Built for Your Credit Union’s Needs

Things change, particularly with emerging regulations such as CECL – make sure your vendor is ready to change with you. Scalable solutions allow your credit union to add or decrease the amount of support needed at any given time, ensuring your credit union has as much or as little as they need. If a solution is not scalable, your credit union may find itself paying for services it doesn’t need, or worse, with insufficient hours, data or computing power to meet its needs. Talk to any vendor you’re considering about scalability and see what services they provide. Do they have scalable options at all? Will they allow you to scale in the middle of a billing cycle? Make sure you have those questions answered before you sign anything.

Your vendor should provide you with flexibility to adjust the approach to your needs – whether it be multiple methodologies allowing you to select the appropriate approach for each loan segment, model multiple scenarios, and enter adjustments for economic, geographic and qualitative factors. They should ingest the data in a variety of formats and allow you to easily map your data so you’re not taking on the cost of creating new extracts.

Closing Your Books on Schedule

Speed is important, too. In today’s fast paced world, your credit union can’t afford to be left behind. In terms of digital services, see when the vendor processes data. Many process overnight, but there are some that process immediately, ensuring your credit union is always using the most-up-to date information available. Immediate processing can also limit the amount of data lost in case of a power outage or other system failure.

Transparency Before and After the Audit

Any CECL vendor your credit union works with should make every effort to provide transparency to you; whether that’s about the CECL methodology approach, how much the service costs or by providing customer testimonials when requested.

Audits are coming up soon, and the vendor your credit union partners with should be able to provide an easy audit experience. They should be able to easily demonstrate how calculations are performed and prove validity, as well as explain how data is kept secure. If the vendor you are considering cannot provide this information before you purchase their services, it might be in your best interest to reconsider using them at all.

If the vendor is able to provide client testimonials, look for indications that the vendor is easy to work with and that their services work as advertised. Client testimonials are generally positive, so look for what is not said as much as what is. If across all the testimonials, none of them mention the vendor being open to collaboration or specific outcomes, it may be that the vendor isn’t as strong as they present themselves.

Further, avoid any vendor that won’t share total cost. A service should be presented to you with a total amount, including any implementation or starter fees, subscription fees and charges for additional support. If the vendor will not commit to a solid price, it’s time to look elsewhere.

Credit Union-Focused

Arguably one of the most important factors when considering a CECL partner is their dedication to the credit union movement. Credit unions were among the last to be subject to the CECL rollout, and thus will have the most particular needs. A CECL partner who is familiar with the credit union industry and who has geared their solution to meet those needs will provide a smoother experience and be prepared to address issues before they arise.

Trellance, a credit union cooperative, is here to help your credit union get ready for CECL. We are owned and operated by credit unions, and we only serve credit unions. Our solutions are built with credit unions in mind, and we’re here to help you every step of the way. We’ll help with migration to our servers; we have consulting services available if need be and our team can create custom solutions that are built for your credit union’s specific needs. We’ll always pick up the phone, and we’re here to help you talk through your options at any time.

Always ask questions when considering a new vendor. Reach out today to ask our CECL experts at Trellance about how we can elevate your CECL program.

Daragh Fitzpatrick is the Senior Vice President of Advanced Analytics at Trellance. 

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