What Is CECL with MATLAB?

Current expected credit loss (CECL) is a new standard created by the Financial Accounting Standards Board (FASB) for regulating credit loss reporting of financial institutions. It governs balance sheet accounting of loans, mortgages, and other credit instruments and is due to come into force in 2021, primarily affecting U.S. reporting. CECL incorporates a credit impairment charge on affected assets, resulting in higher provisioning expenses.

Expected credit loss (ECL), a main output for the IFRS9/CECL workflow, is a probability-weighted estimate of credit losses during the expected life of a financial instrument. With the new proposed CECL standard, the estimation method requires point-in-time (PIT) projections of probability of default (PD), loss given default (LGD), and exposures at default (EAD). CECL model types available with MATLAB^® include:

Stochastic modeling of default and recovery
Macroeconomic modeling and forecasting
Scenario generation
Instrument pricing and risk sensitivity
Automated reporting, incorporating PIT model and data selection

For more detail on doing CECL with MATLAB, see Risk Management Toolbox™, Statistics and Machine Learning Toolbox™, Econometrics Toolbox™, and MATLAB Report Generator™.

Examples and How To

Economic Scenarios and Expected Credit Loss Calculations - Example
Modeling Probabilities of Default with Cox Proportional Hazards - Example
Stress Testing of Consumer Credit Default Probabilities - Example
Create Custom Lifetime PD Model for Decision Tree Model with Function Handle - Example
Macroeconomic Stress Testing to Support CECL Requirement (26:29) - Video
Financial Risk Management Application and Code Examples - Example
Fitting Data with Generalized Linear Models - Example
Modeling Correlated Defaults with Copulas - Example
Bank Stress Testing Using MATLAB (4:28) - Video

Software Reference

portfolioECL Compute the lifetime ECL at the individual or portfolio level - Function
Expected Credit Loss Computation - Documentation
Overview of Lifetime Probability of Default Models - Documentation
Model Loss Given Default - Documentation
Credit Simulation Using Copulas - Documentation
creditscorecard: Create creditscorecard object - Function
Binning Explorer: Bin data and export into a creditscorecard object - Documentation
Generalized Linear Models - Documentation

Using MATLAB to Develop Macroeconomic Models

CECL and IFRS 9 Modeling in MATLAB: Measuring Lifetime Expected Credit Losses

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