Bankers, consumer groups and members of Congress are urging the Financial Accounting Standards board to delay the Current Expected Credit Loss standard to match—at least—the delay granted to credit unions.
The board has proposed to push back the effective date for credit union compliance with CECL to January 2023. A final vote on the delay is expected soon.
The lobbying comes, as the NCUA and federal banking regulators released a proposed blueprint on how they will implement the CECL standard. The agencies are seeking public comment on its proposal.
Under the CECL standard, institutions will have to recognize the expected lifetime losses at the time a loan or financial instrument is recorded.
The NCUA has the authority to phase in the CECL standard, as the agency measures its impact, NCUA Chairman Rodney Hood recently said.
On Thursday, the banking agencies proposed technical guidance on CECL, as well as the way agency examiners will review compliance.
“Examiners are expected to assess the appropriateness of management’s loss estimation processes and the appropriateness of the institution’s ACL balances as part of their supervisory activities,” the agencies said.
“The review of … including the depth of the examiner’s assessment, should be commensurate with the institution’s size, complexity, and risk profile,” they continued.
Examiners also may evaluate the models that institutions, including credit unions, use, as well as the effectiveness of board and management oversight, the agencies said.
The FASB board indicated its support for the delay Thursday but will formally vote later.
Credit unions continue to argue that credit unions should be exempt from CECL.
“CUNA’s longstanding position has been and continues to be that application of CECL to credit unions is inappropriate, and that implementation of the new standard will create compliance challenges, as well as alter the financial standing of credit unions,” CUNA Deputy Chief Advocacy Officer Elizabeth Eurgubian said.
NAFCU/President CEO B. Dan Berger has said that the delay will help credit unions but said that FASB should work with the NCUA as the standard is implemented.
ABA President/CEO Rob Nichols said he was disappointed that banks are not being granted the same delay that credit unions are scheduled to receive.
“With today’s vote to delay CECL implementation for smaller companies, FASB acknowledges the significant challenges of complying with one of the most sweeping accounting changes in years,” he said. “We remain deeply disappointed that FASB has yet to take the logical next step of pausing implementation for all companies until a rigorous quantitative impact study can be completed to assess its full effects.”
Reps. Ted Budd (R-N.C.) and Vincente Gonzales (D-Texas) also sent FASB a letter asking the board to delay implementation of the standard.
And the Center for Responsible Lending said that the CECL will discourage lenders to originate loans to low-and moderate-income families and communities of color.
Center President Mike Calhoun called on FASB to delay implementation until it can study the likely impact on those borrowers.