WASHINGTON–CUNA has sent a letter to NCUA urging it to work with credit unions as they try to comply with the Financial Accounting Standards Board’s (FASB) pending proposal that will require CUs to utilize a current expected credit loss (CECL) model on all financial assets and financial liabilities. The trade group repeated its position that it does not believe the new model is “appropriate” for credit unions.
“This approach will have a dramatic impact on credit unions, due primarily to a change that will require them to hold much more in reserves for future possible loan losses,” said CUNA in its letter.
CUNA said that during a FASB-hosted roundtable, representatives of the Fed, FDIC, and OCC all addressed concerns and said they plan to look for simple, practical applications of the new rules, and that they are mindful of the potential burden the standard may impose. While NCUA was represented at the meeting, the agency has not provided the assurances the other regulators have, according to CUNA CEO Jim Nussle, who signed the letter.
“Specifically, we urge NCUA to assure credit unions that the agency will strive to minimize the regulatory burden of the standard, as well as to reduce the unnecessary financial impact the standard will impose on credit unions,” wrote Nussle. “To be clear, CUNA does not believe the CECL model is appropriate for credit unions, and we believe the accounting changes of the standard will severely increase credit union allowances for loan and lease losses. However, the impact of the standard on credit unions will be more manageable if they are not required to utilize sophisticated computer programs to determine credit impairment.”