CECL is Credit Unions' Loch Ness Monster

By Randy Karnes


If our industry had its own Loch Ness monster, we would call it CECL, and we’d all be waiting for the first official sighting. The amount of confusion, hand-wringing, and speculation surrounding CECL is enough to make any person shake their head. Yet despite all the urging for patience, credit unions are still panicking to get their programs in order before they even know what they should look like.

Vendors see this and are champing at the bit to make their file specifications ready to sell to credit unions. The result is widely differing opinions on what’s right, but credit unions still willing to throw their money at the “right” one.

I’m not surprised—credit unions are leading with their checkbooks as they are impatient for clarity. CECL is a feeding frenzy created by an accounting/regulatory community reaching for the ability to predict perfectly and hoping in three to four years they will come across a truffle in a field of possibilities.

Letting regulation lead the way for investment dollars isn’t a new thing. You can’t blame the audit and compliance professional at the credit union for wanting to have the best tools and the perfect response to regulations. But too often these expenditures come at the expense of areas of operations that need that money more.

The Goal

In light of this confusion, our goal is to integrate with as many CU-identified CECL vendors as possible and to correlate a common data approach. Like ALM, we’re looking for the secret sauce that third parties will accept as best practice. But unlike ALM, we're looking to be out in front of this and to avoid a generation of spending on third-party solutions.

To become an expert at CECL data collection, archiving and movement. Then become an expert in providing tools that use the data. This goal is a bit trickier due to how long it will take to have an experienced set of practitioners in the marketplace (CU themselves as consumers of these calculations, vendors as tool providers and certifiers of these calculations, regulators/CPAs as auditors of these calculations, and some type of actual experienced verification by living the portfolios).

I look forward to credit unions and vendors slowing down a bit. In the race among vendors to have the winning formula, credit unions are betting on them with their dollars. This will be one of those situations where late to the party will be the fashionably smart thing to do.

Randy Karnes is president/CEO of CU*Answers, a CUSO in Grand Rapids, Mich. For info: cuanswers.com.

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