NCUA Chairman Rodney Hood Thursday urged the Financial Accounting Standards Board (FASB) to exempt credit unions from the current expected credit loss (CECL) standard. CECL is a new accounting standard, scheduled to apply to credit unions starting in January 2023, that would use an “expected loss” measurement for the recognition of credit losses.
“CUNA’s longstanding position has been that credit unions should not be subject to the CECL standard, as it will both alter the financial standings of credit unions while presenting new compliance challenges, concerns shared by Chairman Hood,” said CUNA President/CEO Jim Nussle. “We thank Chairman Hood for his efforts to show FASB that CECL is inappropriate for credit unions.”
Hood’s letter states that, for most credit unions, implementing CECL will have an immediate impact on net worth, and though CECL extended implementation for credit unions by one year, credit unions are currently devoting maximum time and resources seeing members and businesses through the coronavirus disease (COVID-19) pandemic.
“The NCUA uses the incurred loss model as it supervises and examines the 5,236 credit unions under our purview for safety and soundness. Of those credit unions, 3,641 (nearly 70%) are under $100 million in total assets,” he wrote. “Attempting to recognize all expected credit losses, even using the weighted average remaining maturity method, is fraught with data collection challenges for the smallest of our supervised credit unions. In short, CECL provides insufficient advantages over the incurred loss model to support implementing CECL in the credit union system, especially under the current economic conditions.”