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Financial Landscape Developments: Blockchain’s Impact and FASB’s New CECL Comments

Posted by Austin Wentzlaff on Jun 21, 2016 11:52:37 AM

Financial Landscape Developments: Blockchain's Impack and FASB's New CECL Comments

The financial services industry is being constantly challenged with new regulations and outside threats. Two important developments in the financial world recently that are worth noting are the immense growth in blockchain technology utilization, as well as the impact of the Financial Accounting Standards Board’s (FASB) recent comments on Current Expected Credit Loss (CECL) guidelines. These are both undoubtedly items to keep top-of-mind, as they are impacting institutions from community banks and credit unions to the large banks. 

Blockchain

Currently, more than forty leading financial institutions along with top firms across other industries are experimenting with blockchain technology as a way to safely and securely track assets. This is a development that will not only reduce the risk of fraud, but increase the speed of data transfers. For those reasons, among others, blockchain technology is certainly worth paying attention to.

Beyond its distributed ledger capabilities, blockchain will also soon play a key role in identity protection and privacy. Imagine a world where you no longer have to remember passwords. You have an encrypted identity where you are the only one that stores your personal information. When logging into a site, you would need only to present necessary attributes and nothing else, such as your age, but not your actual birthday. This optimizes privacy, as those receiving your attributes have no way of correlating them with your other, unshared attributes. In this new world, the person is in complete control of their personal information. The great news is that credit unions have a wonderful opportunity to be on the forefront of this new wave by being the issuers of the sovereign identities.

Learn more about Blockchain’s impact at the Analytics & Financial Innovation Conference.

CECL

According to Joe Breeden of Deep Future Analytics, “[CECL’s] new guidelines are all about life-of-loan reserving. Even if small institutions are allowed to use “spreadsheets”, all institutions will need to reserve for the same horizon. That means either rolling back life-of-loan (unlikely) or new models. All institutions will need new models, whether they are simple or complex, statistical or spreadsheet. Then the fun begins.”

 “All models must be validated.”

 “Who will decide if the models are good enough for the size of the institution? With no fixed rules on which institutions must build which kind of models, the validators, auditors, and examiners will be left to adjudicate institution-by-institution.”

Learn more about upcoming CECL guidelines at the Analytics & Financial Innovation Conference.

The powerful impact of blockchain technology, and the ironically expensive, flexible approach of CECL will be thoroughly presented about and discussed at the 2016 Analytics and Financial Innovation Conference. If you haven’t already, register now! http://www.axficonference.com/

Register for the 2017 Analytics and Financial Innovation (AXFI) Conference. Meet the leading minds of Credit Union Big Data & Analytics, explore what's new in emerging technologies, and see for yourself what data can do.

 

Topics: Big Data & Analytics, Blockchain, CECL

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