NCUA to Phase In CECL Standard, Hood Says: Onsite at NAFCU Congressional Caucus
“This will go a long way toward providing relief to credit unions ..." Hood tells Caucus attendees.
WASHINGTON – The NCUA has the authority to phase in the upcoming Current Expected Credit Losses (CECL) standard, as the agency measures its impact, NCUA Chairman Rodney Hood said Tuesday.
“This will go a long way toward providing relief to credit unions that could see relatively large increases to their loan loss reserves when the new accounting standard becomes effective,” Hood said at NAFCU’s Congressional Caucus.
He added that the agency’s Office of General Counsel has determined the agency has the power to phase in the standard for credit unions.
The Financial Accounting Standards Board has proposed pushing back the effective date for credit union compliance with CECL to January 2023.
However, credit union trade groups have vehemently argued that they should not be subject to CECL at all.
Under the CECL standard, institutions will have to recognize the expected lifetime losses at the time a loan or financial instrument is recorded.
Hood also said he does not oppose efforts by credit unions to purchase banks, adding that the NCUA and Federal Deposit Insurance Corporation review all such transactions before they go into effect.
“If it makes it possible for a local financial institution to keep its doors open, then we must consider this factor,” Hood said.
He said the NCUA will use the rulemaking process later this year in an effort to bring more clarity and transparency to such transactions.
Banking trade groups have vehemently opposed allowing credit unions to purchase banks. The Independent Community Bankers of America has formed a task force to fight such purchases.
Hood also said by the end of the year, the NCUA board will consider a proposed rule to allow subordinated debt to be counted as regulatory capital for a broader range of credit unions.
Hood said he is concerned that the economy, with low interest rates and a flat yield curve may put pressure on some credit union earnings. He said the trend may increase liquidity risk for some credit unions.
“Credit unions with highly specialized business models need to have strong capital and liquidity levels, and best-in-class risk management and monitoring approaches,” he said.