Application of the current expected credit losses (CECL) standard to credit unions continues to be inappropriate, CUNA wrote to the House Financial Services subcommittee on financial institutions and consumer credit Tuesday. The subcommittee conducted a hearing Tuesday on the impact of the standard, which was set forth by the Financial Accounting Standards Board (FASB).
“CECL is intended to address delayed recognition of credit losses resulting in insufficient funding of the allowance accounts of certain covered entities. However, underfunding of allowance accounts has not generally been an issue for credit unions,” the letter reads. “Further, the typical user of a credit union’s financial statements is not a public investor—such as with large, public banks—but instead is the credit union’s prudential regulator, the NCUA.”
CECL was adopted in 2016, uses an “expected loss” measurement for the recognition of credit losses. FASB recently finalized a CUNA-backed delay in implementation to give credit unions and other entities more time to come into compliance.
CUNA’s letter notes, in addition to the direct effect the standard will have on credit unions’ financial positions, credit unions remain concerned about the compliance burden that comes along with it.
“We share these ongoing concerns in hope that FASB will take advantage of future opportunities to adjust the standard with an eye toward reducing the compliance burden on credit unions... we believe more can and should be done to ensure entities are able to comply with the standard,” the letter reads. “We ask this committee to convey the industry’s concerns to FASB in hopes it will review the standard for opportunities to reduce unnecessary compliance challenges as well as develop compliance resources in coordination with prudential banking regulators, including the NCUA.”