Benchmarking, Back-Testing & Sensitivity Analysis

Benchmarking compares your allowance model to that of your peers to identify potential variances. Back-Testing evaluates the accuracy of your allowance through comparison of estimated losses and actual losses. Sensitivity Analysis assesses the robustness of your allowance model compared to changes in key assumptions. These services work in conjunction with one another to ensure that your model is calculating your allowance accurately.

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The best CECL analytics are built with

Benchmarking Service

  • Comparing the CECL allowance estimate of a financial institution with its peers and identifying potential variances
  • Enabling management to determine why their estimate differs from the benchmark by comparing the institution’s model inputs and models with peers
  • Analyzing if peer institutions have significantly different loss and prepayment rates than the institution and creating a subsequent report

Back-Testing Service

  • Evaluating the actual losses compared to the Forecasted and Reversion Rates for the pool
  • Assessing the appropriateness of the qualitative factors applied based on actual changes in variable inputs
  • Recommending potential refinements to the model
  • Creating a back-testing report annually for your institution to support your annual model review and validation

Sensitivity Analysis Service

  • Assessing the robustness of your CECL allowance estimates to changes in key assumptions or inputs
  • Testing the impact of economic and employment scenarios on overall allowance results
  • Identifying the assumptions with the most significant impact on the CECL allowance estimate
  • Performing sensitivity testing on your institution’s model, based on stressing the portfolio, and providing a separate report of the results

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