CECL committee planning at credit unions
Many credit unions already have formed a committee to oversee CECL planning and implementation, and that is a wise first step. Forming a CECL committee will jump-start the education process across the organization so that everyone from the board chairman to the IT worker understands the importance and implications of the new accounting standard. This committee ensures that it is not just one department that is focused on CECL, even if the allowance is currently the responsibility of primarily one department (such as accounting or finance). CECL at credit unions will require more involvement, input and decisioning from other areas of the organization, to varying degrees, so it is best to include those areas early on in the process.

If a credit union has not yet formed a committee to oversee CECL implementation, consider including representatives from the board of directors, accounting/finance, information technology, credit analysis, internal audit and risk mitigation. Why is it important to include some of these areas? Some areas of the credit union may already be performing tasks that will be useful for implementing CECL. For example, the credit department may be running and updating credit scores for your borrowers without the knowledge of finance, yet that data may be important for vintage techniques or migration techniques. The finance department or Treasury may be involved in the Asset Liability Management exercise, where prepayment is a focal point, and they may be already providing data to a third party that performs cash flow analytics. The risk department or someone with a solid understanding of control procedures and documentation should be involved to ensure the credit union is considering control risk, operational risk and compliance risk.

CECL committees at credit unions may also need to be familiar with more data sources than their counterparts at US banks. It is common for credit unions to departmentalize loan data, meaning mortgage data may be stored in one location, while auto loans are stored in a different data warehouse. As a result, the CECL committee may also require a steward from these data systems, someone who understands what data is available where and where the final system of record is.

Finally, it is important to include these various areas because as auditors and examiners communicate expectations, the committee can ensure they are passed on throughout the organization.

A CECL committee should have clear objectives to ensure the credit union is progressing toward implementation of the new standard. Regular meetings are also vital for checking in on progress of various departments involved.
As credit unions develop their CECL committee and consider the various members and their contributions, it can be helpful to provide a clear definition of what will be expected of each member and their respective department. One way to do this? For each objective of the committee, identify who is:

  • Responsible — Who is doing the work or delegating the work? This can be multiple parties.
  • Accountable — Who is the one person accountable for completion or failure of accomplishing the objective, even if not the responsible party? This can be the same as the responsible party.
  • Consulted — Whose input is requested in making decisions related to the objective?
  • Informed — Who needs to be kept abreast of the decisions/tasks related to this objective (e.g., board)?

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