WASHINGTON (7/1/15)--CUNA continues to have grave concerns with the Federal Accounting Standards Board (FASB) credit impairment proposal, concerns it expressed in a letter to National Credit Union Administration Chair Debbie Matz Tuesday. The proposed rule is likely to be finalized by the end of the year, and would require credit unions to utilize a current expected credit loss model on all financial assets and liabilities.
“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,” CUNA’s letter reads. “While the proposal will in no way change economic reality, it will result in lower apparent capital ratios at all credit unions and banks.”
CUNA is urging the NCUA’s Office of Examination and Insurance to instruct examiners to make the appropriate adjustments in assessments of capital adequacy to minimize negative impact on credit unions.
The compliance burden of the FASB proposal also concerns CUNA.
“Our concern is that it will be extremely difficult and costly for credit unions to comply with FASB’s proposed changes, which will require extensive resources to analyze the loan portfolio on a granular level to calculate and project life-of-loan losses,” the letter reads. “Even those credit unions able to allocate the resources necessary to comply with the proposal will likely encounter major challenges since the level of data analytics that will be required is less common among credit unions, unlike much larger, complex banks.”
CUNA has previously met with FASB Chair Russell Golden to express these concerns. By reaching out to the NCUA, CUNA hopes an additional push from a federal regulator will encourage the board to consider major changes.