The solution includes the implementation of ControllerView, AxiomSL’s signature enterprise data management platform that offers data lineage, risk aggregation, workflow automation, validation and audit functionality.
AxiomSL chief client officer Harry Chopra said: “We’re delighted to work with First Hawaiian Bank to ensure they’re ready to meet the new accounting requirements posed by CECL.
“CECL is causing an explosion of risk data for banks to manage, as credit assessments have to be done monthly versus annually. In addition, banks need to have an audit trail of the models invoked, calculations made and attribution of their credit losses in a single data ecosystem.
“By having the end-to-end CECL process implemented in ControllerView’s Data Integrity & Control Platform, we help clients with iteration and fine-tuning of the process, enabling them to better manage P&L volatility.”
When CECL takes effect starting December 15, 2019, it will require banks to put reserves aside for expected – rather than incurred – loan and other credit losses in the case of impairment. As a result, CECL will fundamentally change how banks estimate and calculate their expected credit losses, as well as their allowance for loan and lease losses (ALLL).
This new accounting standard will demand significant changes to the granularity of data a bank maintains and analyzes – including a forecast of future cash flows, vintage analysis, and control and disclosure of information to track credit quality throughout the lifetime of a loan. In order to achieve compliance, banks’ finance and risk management functions must adopt new organizational processes and performance metrics.
AxiomSL’s CECL solution successfully addresses these challenges while offering unmatched flexibility and transparency into the entire process. Typically, banks run chains of Excel-type models to calculate various impairments. In contrast, the AxiomSL solution enables a bank to use a set of pre-programmed business rules to automate an end-to-end calculation process.
This approach empowers clients to analyze impairment results through what-if simulations, to identify the principles that best align with their business model, and to fine-tune expected credit losses.
For modeling, clients have two options: they can plug outputs from their own or third-party models into ControllerView, or they can code and execute their own models within the platform. Throughout the entire process, AxiomSL’s CECL solution enables clients to track data lineage and drill down to source data.
First Hawaiian Bank chief risk officer Ralph Mesick said: “When it came time to select a partner to help us prepare for CECL implementation, we undertook an extensive due diligence effort and concluded that AxiomSL is best equipped to help us tackle the myriad of challenges associated with this new accounting standard.
“Although CECL is a new requirement, AxiomSL has a strong reputation in the industry and a well-established track record of delivering solutions that empower financial institutions with the flexibility, controls and transparency needed to satisfy audit, regulatory and investor expectations.”
AxiomSL’s solution for International Finance Reporting Standard 9 (IFRS 9) – CECL’s international counterpart – has been repeatedly recognized as a standout amongst similar solutions for its strengths in aggregating and reconciling data across risk and finance/accounting business functions.
Most recently, the IFRS 9 solution was named “Enterprise Solution of the Year” in the inaugural Risk Technology Awards, as well as “Best Risk Calculation Engine for Regulatory Compliance” in the 2018 RegTech Awards.
Source: Company Press Release
