Author: Adam Mustafa, CEO
In today’s banking landscape, commercial real estate (CRE) concentrations are frequently regarded with caution, often drawing concern from regulators, shareholders, and industry observers alike. Yet,...
More banks are using the probability of default/loss given default (PD/LGD) model for CECL than any other methodology, according to the accounting firm BKD CPAs and Advisors.
Firm partner Brandy Buckler wrote in a May 21 Bank Director article that approximately 60 percent of banks with less than $50 billion in assets indicated using the method, while less than 10 percent used the simple WARM method. She said the finding “could prove very useful to other community banks” as they prepare for the January 2023 CECL implementation deadline.
The PD/LGD model is far superior to other models because it is intuitive, driven by loan-level information, minimizes the dependency and qualitative factors and can be used to inform strategic planning, a January Invictus Intel blog article concluded.
The Financial Accounting Standards Board, which imposed the new standard, noted this week that most banks that implemented the standard in 2020 were well prepared. FASB also noted that banks are finding it hard to make peer comparisons because there is no standard “benchmark of information” that is disclosed to investors. This echoes an Invictus study from November that looked at public disclosures of bank’s CECL findings.
Invictus Blog, banking, liquidity, stress testing, cre
Author: Adam Mustafa, CEO
In today’s banking landscape, commercial real estate (CRE) concentrations are frequently regarded with caution, often drawing concern from regulators, shareholders, and industry observers alike. Yet,...
Invictus Blog, banking, liquidity, stress testing
Author: Adam Mustafa, CEO
Reports are emerging about regulators prescribing Individual Minimum Capital Requirements (IMCRs) to banks with Commercial Real Estate (CRE) and construction loan concentrations. IMCRs are often...
Invictus Blog, banking, liquidity, stress testing
Author: Patti Casaleggio, Head of Operations
Navigating regulatory landscapes can be challenging, especially for financial institutions facing increased scrutiny and evolving standards. Effective communication with regulators is...