Attempts to ease regulatory burdens (Image: Shutterstock).
An attempt to ease the regulatory pain associated with using the Current Expected Credit Loss (CECL) standard won't help credit unions, CUNA Senior Director of Advocacy and Counsel Luke Martone said Monday.
"While we support true relief associated with CECL, regardless of who it benefits, based on discussions with our member credit unions, it is our understanding that credit unions are unlikely to adopt the proposed transition relief," Martone wrote in a letter to the Financial Accounting Standards Board.
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Under the CECL standard, institutions will have to recognize the expected lifetime losses at the time a loan or financial instrument is recorded.
The standard does not become effective for credit union Call Reports until the start of 2022.
Credit unions continue to argue that they should not have to comply with CECL.
"NAFCU maintains that credit unions should never have been included within the scope of the CECL standard because they were not a part of the poor lending practices that precipitated the financial crisis," Ann Kossachev, NAFCU's director of regulatory affairs said.
"CECL is intended to address delayed recognition of credit losses resulting in insufficient funding of the allowance accounts of certain covered entities," Martone wrote in his letter. "However, underfunding of allowance accounts has not generally been an issue for credit unions."
He added that the typical user of a credit union's financial statements is not a public investor, but instead is the NCUA.
FASB is seeking comment on a plan the board said could provide some regulatory relief for those having to implement CECL.
The board said that some stakeholders have said that some people preparing financial statements are electing to use the fair value option on newly originated or purchased financial assets that have historically been measured at amortized cost.
Electing the fair value option would require them to maintain two measurement methods–fair value measurements and amortized cost basis.
The proposal would allow preparers to use the fair value option for certain assets, which could reduce the cost for producing such reports.
Credit unions are unlikely to use that option, Martone said.
He said that credit unions remain concerned about the compliance cost associated with CECL, adding that those changes will "require extensive resources to analyze the loan portfolio on a granular level to calculate and project life of loan losses."
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