WASHINGTON (3/23/16)--The Credit Union National Association’s call for credit unions to weigh in on a proposed current expected credit loss (CECL) standard has resulted in 955 letters to the Financial Accounting Standards Board (FASB) so far, with credit unions nationwide sharing how the proposal will impact them.
Proposed by FASB, the CECL proposal would utilize a single “expected loss” measurement for the recognition of credit losses, which would replace the multiple existing impairment models in U.S. generally accepted accounting principles that generally use an “incurred loss” approach.
“The cost to comply with the new changes will exceed any benefit that would be derived from the proposed change. Our understanding is the software is both expensive and difficult to run,” said Chris McCreary, president of United Consumers CU, Independence, Mo. “The actual ability of my mid-sized credit union to comply with the complexities inherent in the CECL model may require us to get outside expertise which only adds to the cost.”
McCreary added that his credit union is far more interested in working to provide United Consumers’ members with top-notch financial services, rather than expend additional time and effort to comply with a new, burdensome regulation.
Michael Powell, senior vice president/chief lending officer at Harborstone CU, Lakewood, Wash., said the proposal would require Harborstone to hold additional capital well above its current loan loss reserves, which he said is likely to have “significant consequences on lending."
“For us and for the thousands of other credit unions across the country who continue to adhere to prudent, safe, and sound lending practices, the Great Recession was not a time of run-a-way losses and inadequately funded allowances,” Powell said. “Based on current standards, which have served financial institutions well over the years, we actually funded and held more in reserves throughout the recession than our both our historical or actual loss experience.”
Other concerns brought up by credit unions include: