CUNA welcomed the new chairman of the Financial Accounting Standards Board (FASB), Richard Jones, with a letter sent Wednesday. FASB is a standard-setting entity responsible for, among other things, the current expected credit loss (CECL) standard, and Jones became chairman July 1.
CUNA has steadfastly maintained that CECL, which recognizes lifetime expected credit losses as opposed to the current “incurred-loss” approach, is inappropriate for credit unions. CUNA has also called for CECL implementation to be delayed to at least 2024 due to the ongoing pandemic, which members and Congress and federal regulators have also supported.
“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 NCUA.”
CUNA is also concerned with the compliance challenged presented by CECL, which CUNA believes will “require extensive resources to analyze the loan portfolio on a granular level” to calculate and project life of loan losses.
“Further, we maintain that CECL will hinder lenders’ (including credit unions) ability to uplift low- and moderate-income borrowers in their goal of achieving financial independence and the American dream. A completely unintended, though real, consequence of CECL is that it will force lenders to be much more discerning of potential borrowers with less than perfect credit.”
CUNA’s letter notes similar concerns expressed by NCUA Chairman Rodney Hood, who echoed CUNA’s call for credit unions to be exempt from CECL in an April 30 letter to FASB.