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Home » Proposed CECL relief unlikely to be of use to CUs, true relief needed
Policy & Issues

Proposed CECL relief unlikely to be of use to CUs, true relief needed

March 5, 2019

Proposed changes to the current expected credit loss (CECL) standard are unlikely to be adopted by credit unions, thus CUNA urged the Financial Accounting Standards Board (FASB) Monday to explore ways relief for credit unions can be achieved. CUNA’s letter was sent in response to a “Targeted Transition Relief” proposal intended to ease transition to the CECL standard.

CECL uses an “expected loss” measurement for the recognition of credit losses. CUNA is concerned with both its effect on financial standing of credit unions and the compliance burden it is already presenting.

CUNA’s letter reiterates its longstanding position that the application of CECL to credit unions is inappropriate.

“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. 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 National Credit Union Administration.”

CUNA called on FASB to 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.”

CUNA President/CEO Jim Nussle wrote to NCUA Chairman J. Mark McWatters in February to urge NCUA to help prepare credit union for implementation of the standard.

KEYWORDS cecl
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