Loans stacking up. Source: Shutterstock.

The new Current Expected Credit Loss standard is having a profound financial and operational impact on the way credit unions and other financial institutions collect data and analyze loan performance – and loan participations create an added wrinkle for compliance.

CECL implementation has placed new burdens on financial institutions to both collect and organize the relevant loan data and operationalize a reliable system of ongoing compliance. As a result, financial institutions are increasingly relying on third-party specialists to streamline these efforts – especially as they relate to in-house portfolios. But how can they comply with the new CECL rules if they pursue loan participations? After all, the loan data required to compute the lifetime charge-off rate will come from a number of external sources, rather than internal ones.

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