IHS Markit launched its economic and financial scenario solution designed to help banks comply with the current excepted credit loss (CECL) estimation required under the Financial Accounting Standards Board (FASB) standard going into effect in 2020.

CECL requires lending institutions to calculate expected credit losses using reasonable and supportable forward-looking macroeconomic and financial forecasts and report the losses on a quarterly or monthly basis. Many firms lack the macroeconomic and financial forecasts, historical macro data, and tools required to simulate the range of credit loss scenarios required by CECL.

The IHS Markit solution provides eight economic scenarios to help banks estimate future expected credit impairment, understand risks impacting credit losses and comply with the requirements under CECL. The scenarios are produced by the firm’s team of economists, using its proprietary, widely-respected macroeconometric model, applied by clients for forecasting and compliance purposes for decades.

“Our CECL solution provides the macroeconomic and financial scenarios and historical data to drive a firm’s credit loss estimates, whether produced in house or by a third-party” said Chris Varvares, vice president and co-head of U.S. economics, Macroeconomic Advisers by IHS Markit. “It delivers eight transparent and comprehensive, probability-weighted macroeconomic and financial scenarios from our proprietary models and is able to be implemented across many vendor platforms firms already employ.”

Specifically, the solution includes:

• National macro and financial data: historical and forecast data for eight scenarios at a national level
• Regional data: historical and forecast data for three scenarios covering nine regions, 50 states and the top 100 metropolitan areas

The forecasts are provided over a 10-year horizon and are updated monthly. The scenarios are accessible through the Connect Platform from IHS Markit or able to be implemented across various vendor platforms.

Headquartered in London, IHS Markit provides next-generation information, analytics and solutions to more than 50,000 customers in business, finance and government, improving their operational efficiency.