CECL Delay Is Good, But Kill It Altogether, CU Trades Say
FASB has proposed pushing back the effective date for CU compliance with CECL to January 2023.
Credit union trade groups said that while they support the delay in the effective date of the Current Expected Credit Loss (CECL) standard, they continue to believe that their institutions should not be subject to the new standard at all.
“CECL is intended to address delayed recognition of credit losses resulting in insufficient funding of the allowance accounts of certain covered entities,” Luke Martone, CUNA’s senior director of advocacy and counsel said, in a letter to the Financial Accounting Standards Board (FASB). “However, underfunding of allowance accounts has not generally been an issue for credit unions.”
“Specifically, a one-year delay of CECL’s effective date will provide much needed relief by granting credit unions additional time to train staff, develop models for different loan pools and conduct parallel runs,” NAFCU President/CEO B. Dan Berger wrote in a letter to FASB.
But Berger goes on to say that credit unions should not be subject to the standard
FASB has proposed pushing back the effective date for credit union compliance with CECL to January 2023.
Under the CECL standard, institutions will have to recognize the expected lifetime losses at the time a loan or financial instrument is recorded.
NCUA Chairman Rodney Hood said last week that the agency’s general counsel’s office has determined that the agency has the power to phase in the standard.
Martone said that CUNA supports a proposed policy from FASB that would give non-public entities more time than public companies to implement standards.
That way, he said, non-public organizations with limited resources can learn from the implementation by public companies.
Martone said that credit unions face a huge regulatory burden as a result of CECL, saying that the level of the data analytics required by CECL are not as common at credit unions.
“Although NAFCU maintains that credit unions should never have been subject to CECL, the FASB should consider less burdensome alternatives to the standard that recognize credit unions’ unique structure and role within their communities,” Berger wrote.