A proposed interagency policy statement on allowances for credit losses appears reasonable and appears to comport with the current expected credit loss (CECL) standard, CUNA wrote to NCUA Monday. CUNA also reiterated its call to NCUA to continue its outreach to credit unions on CECL as well as increase its focus on CECL compliance resources specific to credit unions.

“We urge the NCUA to recognize that credit unions—in addition to other reporting entities—are in the very early stages of understanding what CECL means for them and how to implement changes necessary for compliance,” the letter reads. “Therefore, we request the NCUA continue to be proactive in its outreach to credit unions in terms of examinations and guidance. While credit unions will not be examined in the context of CECL for a few years, the agency has been seeking input from credit unions during examinations to understand where they are in the process and to determine any areas that may be particularly problematic as credit unions work to come into compliance.”

The proposed statement addresses supervisory expectations for documenting and validating expected credit loss estimation processes; responsibilities of boards of directors and management; and examiner reviews of allowances for credit losses.

CUNA also noted:

• Credit unions and other institutions could use clarity when it comes to instances where there are no historical losses, no industry data and/or no industry data, such as lower credit, higher loan-to-value or exceptions; and
• NCUA should consider flexibility when it comes to smaller credit unions utilizing an individual for review who is independent of the credit union’s credit approval and allowance for credit loss estimate processes, as those credit unions could be required to incur extra costs by being forced to utilize an external third-party review.