Credit Administration groups must upgrade their system capabilities to support more complex requirements and better serve downstream users of the results.
The EVOLV Credit and Reserving Solution provides a centralized platform for automating the end-to-end reserving process, plus capabilities to enable critical credit information to be captured via a controlled workflow process, tightly integrated with finance functions and downstream reporting needs.
EVOLV addresses all aspects of reserving across all of the U.S. GAAP and IFRS standards, including ASC 450 (FAS 5), ASC 310-10-35 (FAS 114), ASC 310-30 (SOP 03-3) and IFRS 9 from data management to reserve modeling to impairment testing and to disclosures and analytics. Most reserving solutions in the market today merely address certain aspects of the reserving process, such as the roll-rate model, or the reserve calculation; however, they fail to manage the entire end-to-end process and do not provide scalable technology to meet your growing needs. EVOLV serves as the single platform across the end-to-end reserving process and further integrates the reserving process with the rest of the institution's loan accounting process.
For large banks with multiple complex reserve models across various asset types, EVOLV can seamlessly integrate (or host) such models and connect them with the rest of the process (both upstream and downstream) that resides on EVOLV. For banks who may not have such modeling capabilities, EVOLV also comes native with its own proprietary reserve models that can be calibrated to fit the institution's needs.
In addition, because EVOLV addresses the complex data capture and transformation process, EVOLV can access data inputs, such as charge-offs, to automatically calculate modeling loss rates. For IFRS 9, EVOLV's powerful tools enable efficient bucket migration assessment. On the downstream side, while other solutions may stop after producing loss rates, EVOLV goes beyond this by enabling your reserve process to be analyzed and maintained at either the loan, pool or group level resulting in key reporting data across your portfolio that not only allows you to automate all your disclosures but provides key insights into the management of your portfolio.
EVOLV supports of your overall credit and reserving process enabling you to:
- Realize greater efficiencies and controls by automating your reserving needs and integrating their results to downstream functions
- Better understand and defend your reserve results through more robust analytics
- More effectively manage change to the reserving process (such as CECL) and make it a non-event for you regardless of what methods you choose to employ
EVOLV is the only solution in the market with out-of-the box capabilities supporting loan credit and reserving, including the following:
- Automated maintenance of underlying historical loss data used to calculate reserve rates for the general allowance
- User-defined scenarios for look-back and emergence periods
- Computation of the reserve rates at the pool or individual loan level
- Utilization of multiple reserve rate models
- Management of the qualitative reserve and allocated vs. unallocated reserves
- Execution of ASC 310-10-35 (FAS 114) cash flow models or collateral value option for impairment testing
- Execution of ASC 310-30 (SOP 03-3) cash flow generation and impairment testing
- Troubled Debt Restructurings in accordance with ASC 310-40 (FAS 15)
- Reserve accounting and generation of all provision journal entries
- Modifications in accordance with IFRS 9
- Bucket assessment in accordance with IFRS 9
- Execution of all types of models to generate expected credit losses in accordance with IFRS 9
- Automated ALLL disclosures
- Detailed reserve analytics
- Reserve scenario reporting
- Control Reports
- CECL Preparedness / access to life-of-loan models
The Future is Now - IFRS 9
For financial institutions subject to IFRS 9, the move to a forward looking expected loss reserving model has already arrived. In July 2014, the IASB published IFRS 9, a forward looking expected loss reserving standard that becomes effective January 1, 2018. As with CECL, IFRS 9 was developed in response to the financial crisis and is based on the premise that a forward looking expected loss reserving model will better position financial institutions to weather the negative side of the credit cycle.
While IFRS 9 shares much in common with CECL when it comes to modeling and data requirements, operationally IFRS 9 will be much more complicated to implement. Unlike the proposed CECL standard which utilizes a single model approach, the IASB opted for a "3-bucket" framework for IFRS 9 that requires assessing changes in expectations since initial recognition and the application of different loss horizons and calculations for different buckets. Financial institutions implementing IFRS 9 will need a system capable of measuring and tracking credit quality for the life of each and every instrument on their balance sheet. This makes the ability to manage data and apply rules as critical a part of the reserving process as the calculations themselves. And one size will not fit all – different segments will need different rules and different models.
EVOLV’s end to end capabilities are uniquely capable of addressing the challenges of this new standard. EVOLV has all of the functions necessary to perform bucket assignments, run credit models of any stripe, translate the credit results into an accounting impairment, generate journal entries and do required analytics and disclosures all on a powerful, customizable platform.
EVOLV is ready. The functions necessary to track, model, calculate, analyze, report and book your IFRS 9 allowance are all native components of EVOLV.
Contact us for a demonstration covering IFRS 9
Credit Review & Management
Credit information doesn't always exist in structured form, centrally located for all downstream users to access or consume easily. EVOLV solves for this. It includes capabilities to capture critical credit data (e.g., risk ratings, debt service coverage ratios, collateral information, loss assumptions, etc.) and enables that data to be consumed and further analyzed by downstream processes --- credit quality reporting, financial disclosures that include credit dimensions, regulatory reporting, etc. Credit teams can utilize EVOLV to express information to a unified system via a controlled workflow process. EVOLV increases the usefulness of the credit review process by converting unorganized credit data from various sources, often collected in an unstructured format, into actionable information that can be accessed, analyzed, and integrated seamlessly into other financial institution’ processes. Credit managers are able to utilize EVOLV’s flexible form-based review templates that accommodate financial institution’s specific data fields to submit reviews that roll up the organizational structure for secondary review and approval. EVOLV allows financial institutions to:
- Perform periodic credit reviews and express results into a centralized system in a controlled manner
- Efficiently manage the review process with customizable workflow rules
- Access reviews from individual relationship managers in the field
- Gain a holistic view of portfolios across risk divisions
- Complete specific reviews in support of ASC 310-10-35 (FAS 114) or ASC 310-30 (SOP 03-3) impairment testing
This streamlined workflow enables credit managers to decrease the amount of time and effort required to compile the required data to complete periodic reviews and risk rating exercises, which provides financial institutions the opportunity to spend more time focusing on loan origination and increasing profitability.
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