The Center for Financial Professionals interviewed Jimmy Yang, MD, Credit and Operational Risk Analysis at BMO Financial Group to address the best ways financial institutions can leverage IFRS 9 methds when working towards CECL implementation.

Jimmy, can you tell us about yourself and your professional experiences?

I have been in the banking quantitative risk management business for close to 20 years now. I am currently the managing director that is responsible for the Bank of Montreal Credit and Operational risk Analytics. My team covers the whole ranges of the credit portfolios: retail (Mortgage / Home Equity / Credit Card / Auto Loans / Student Loans / Personal loans etc.), small business, commercial bank loans, and investment bank loans and treasury investment portfolios. We assigned the credit fundamentals such as PD / LGD / EAD, Loss Forecasting (ALLL / IFRS-9 and CECL), Stress Testing (US CCAR / US DFAST / OSFI MST), Economic Capital and business strategic analytics support etc. We also cover the regulatory capital, economic capital and stress testing for the Operational risk modelling.

Looking back of my own experience, I have been benefited from covering different risk areas and spend time to understand the business aspect of what drives the P&L of a specific business / portfolio. With the new technology, big data, AI and machine learning algorithms becomes more readily available, I constantly encourage my analysts to aim at becoming a portfolio manager instead just an analyst.

How can financial institutions best leverage IFRS 9 methods when working towards CECL implementation?

From efficiency and consistency perspective, Financial Institutions will want to leverage the IFRS-9 models and production system for CECL implementation. We certainly will need to recognize some of the difference between the two accounting regime.

A lot of the underline PD/LGD/EAD models and production engine can be leveraged as well. The input data, quality controls, data lineage, input data reconciliation and the overall governance process can also be leveraged.

It’s important to have a gap analysis done for CEL to keep track of the different requirements in the rules and disclosures.

What challenges may professionals come across when applying infrastructure used for IFRS 9, towards CECL implementation?

To make sure that the IFRS-9 system design do have the flexibility to accommodate the differences between the two accounting regime. Just to name a few areas: staging rule for IFRS-9 but CECL will always take the life time view, retail credit card calculation (difference in the lifetime, undrawn amount handling and differentiation between transactor vs revolver) and also whether the use multiple scenarios for CECL or not.

We will also need some flexibility in the executive dashboard in order to fully understand the quarter to quarter changes for IFRS-9 vs CECL. We will also need the flexibility to accommodate different disclosure requirements.

How do you see the role of the risk management professional within the CECL department changing over the next 6-12 months?

We should generally expect two trends of integration going forward for the risk management areas (including the CECL department):

1. Integration / collaboration for risk, finance and technology.
2. Integration / collaboration between Risk management / Analytics and the line of business

The other change specifically for CECL department will be how to handle the more complexed production system effectively and help the management, internal /external auditors and the regulators getting clarity / comfortable for the model results.

Hear more from Jimmy Yang at the Center for Financial Professionals' CECL 2017 Congress, where we will be joined by over 250 like-minded professionals set to review system requirements for full CECL implementation and impact on the business. To find out more on the agenda and speaker line-up, visit

Votes: 0
E-mail me when people leave their comments –

You need to be a member of Global Risk Community to add comments!

Join Global Risk Community

    About Us

    The GlobalRisk Community is a thriving community of risk managers and associated service providers. Our purpose is to foster business, networking and educational explorations among members. Our goal is to be the worlds premier Risk forum and contribute to better understanding of the complex world of risk.

    Business Partners

    For companies wanting to create a greater visibility for their products and services among their prospects in the Risk market: Send your business partnership request by filling in the form here!