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Allowance for Loan and Lease Losses Financial Services Analytics Application

Overview

The allowance for loan and lease losses (“ALLL”) is considered as one of the most important estimates in an institution’s financial statement and regulatory reporting. Each institution is required to develop a comprehensive, systematic and consistently applied process to determine the ALLL amount.

Recent regulatory guidance (IFRS 9 and FASB Proposed Accounting Standards Updates on Credit Loss reserves) requires financial institutions to transition from the current incurred loss credit impairment model to a more forward-looking loan loss reserve recognition process.

Under the new loan loss reserve model, a financial institution would recognize the loss allowance equal to the current estimate of expected credit losses of its financial assets as of the end of the reporting period. Accenture has developed a framework to help financial institutions meet these new requirements.

Accenture developed an expected loss framework to help financial institutions meet recent regulatory requirements. Our expected loss model calculates credit loss reserves based on historical data from loss experiences, current conditions, and reasonable and supportable forecasts.

With Accenture’s expected loss framework, financial institutions have the flexibility to use their existing Basel PD models or other loss-forecasting models to create a consistent view of credit losses across the organization.

Specific Services

The Allowance for Loan and Lease Losses application automates the loan credit loss reserve calculation process under a controlled environment, streamlining the loss reserve estimation process.

The application also provides advanced ad-hoc analysis, simulation and business intelligence reporting functionalities, which provide transparency to management and regulators on the loan loss reserve process, as well as credit quality changes of financial assets.

Key features

  • ALLL amounts definition based on empirical data and under a controlled environment

  • Data-driven results through a robust quantitative methodology

  • Real-time analysis and adjustments

  • Different ALLL scenarios can be compared across segments and time horizons

Why Accenture

Our scalable Accenture Analytics Applications Platform has financial services applications built in, providing fast and easy access to an array of industry and functional applications that bolt on to the platform. In this way, clients experience quicker time to market and more rapid results.

Clients also access our wide range of capabilities rooted in:

  • Industry knowledge. The validity of our advanced analytics outcomes is underpinned by our deep knowledge of the sector.

  • Business. Applications are designed for business users and focused on business results, minimizing advanced analytics complexity. Getting to accurate outcomes does not require statistical, mathematical or IT knowledge—just business know-how.

  • Flexibility. Applications are based on a framework that can be easily integrated in an enterprise operational environment to drive business process action.