Scenarios for CECL

Reasonable and supportable forecast scenarios for CECL compliance requirements.

FASB’s new CECL impairment standards require timely, forward-looking measurement of lifetime risk using “reasonable and supportable” forecasts. Moody’s Analytics produces defensible scenarios, based on sound economic theory and decades of observed historical econometric relationships, which can help clients address their CECL compliance. Our econometrically derived scenarios enable clients to assess lifetime credit losses under a range of differing assumptions.

Benefits

  • Easily employ multiple, defensible scenarios.
  • Demonstrate correlations between loss performance and economics.
  • Leverage a comprehensive set of indicators beyond headline numbers.
  • Gain insight into specific risk factors, such as interest rates changes.
  • Access to detailed methodology and to our economists to support validation needs.
  • Integrate scenarios with Moody’s Analytics ImpairmentCalc or other products.
  • Choose from multiple delivery options to suit your needs.

Applications

  • Simulate a range of economic outcomes under current conditions.
    Ex. Unemployment, interest rates, house prices, etc.
  • Rank by unemployment and identify percentiles in distribution
    • S1: 10%
    • BL: 50%
    • S2: 75%
    • S3: 90%
    • S4: 96%
  • Exogenize factors from each scenario and run through macro, state, metro and satellite models

Key Features

Scenarios cover more than 1,800 detailed variables, such as unemployment, personal consumption expenditure, retail sales, debt-service burden, bankruptcy rates, initial claims, sector-specific industrial production, interest rate and bond yield curves, housing and labour market performance metrics, demographic series and many more.

  • Baseline and consensus scenarios plus eight alternatives, with a 30 year horizon.
  • Derived from well-established macroeconomic forecasting methods.
  • Available for 50+ countries, including the US and all its state and metro areas.
  • Coverage of more than 1,800 economic, financial and demographic variables.
  • Fully documented model methodology; scenario assumptions published monthly.
  • Back-testing, tracking, and model validation report available.
  • Forecasts updated monthly, history updated in real-time.