WASHINGTON (5/6/15)--The World Council of Credit Unions strongly supports the “concept of proportionality” proposed in a Basel Committee consultative document on expected credit losses (ECLs) as a way to reduce regulatory burdens on less complex financial institutions like most credit unions. The Basel committee on Banking Supervision is the primary global entity that sets standards for financial institution regulations.
The committee issued the document in February. It sets forth supervisory expectations for expected credit losses (ECL) accounting that are consistent with the accounting standards established by the International Accounting Standards Board.
Specifically, the proposal states that financial institutions should follow an expected credit loss model for provisioning the allowance for loan losses. The proposal also does not state that an institution should adopt any particular set of expected credit loss rules. However, for U.S. credit unions the only ECL method option available under U.S. Generally Accepted Accounting Principles (US GAAP) would be the current expected credit losses (CECL) standard developed by the Financial Accounting Standards Board (FASB).
In its comment letter filed last week, the World Council raised three points: