CECL – Initial impact analysis: How to successfully action a parallel run and action on decomposing impact

CECL – Initial impact analysis: How to successfully action a parallel run and action on decomposing impact

By Daniel Hong, VP, CECL Wholesale Credit Implementation Lead, HSBC

CECL 2019 is taking place in New York City on 27-28 March, 2019 – find out more here www.cefpro.com/cecl

Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is? What for you are the benefits of attending a conference like CECL?

I’m currently at HSBC leading the CECL implementation for Wholesale Credit Risk. I’ve been at HSBC for about 7 months. Prior to this, I spent 7 years at E&Y leading numerous regulatory initiatives including CECL, IFRS9, EBA, and CCAR. Prior to E&Y, I spent 9 years at GE capital in both Risk and IT.

For me, the biggest benefit is networking and meeting peers at other banks working on similar initiatives. These contacts can prove extremely useful as we enter various phases of the program.

How in your opinion has the industry progressed towards conducting initial impact analysis and have we seen any initial results as yet?

I believe banks are at various stages where some have done a complete impact analysis and others have not. From my perspective, we are somewhere in middle, where we have some high level ideas, but since we have not completed our model Implementations yet, we do not have definitive results to review.

Can you provide an overview as to what a successful parallel run looks like? What are the benefits and how can institutions utilize the results moving forward?

A successful conclusion to the parallel run is one where it will mirror the production process. For most banks and us included, we expect to have some manual and hopefully one-time activities for our first parallel run (PR). We will have known data issues and we will learn a lot about the process during PR1. As each PR progresses, the goal Is to improve to achieve your end state goal.

How do you see the industry progressing over the next 12 months as we move towards implementation?

Generally I see the industry progressing well towards a 2020 CECL implementation. Most banks I have heard from are gearing up for parallel runs, some will have a full year and others maybe 1-2 quarters. But in general it seems to moving well.

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