news.cuna.org/articles/115654-cuna-joins-trades-to-call-for-cecl-implementation-delay

CUNA joins trades to call for CECL implementation delay

March 6, 2019

CUNA joined with several other financial services trade organizations to urge the Financial Accounting Standards Board (FASB) to delay implementation of its current expected credit loss (CECL) standard to ensure there are no unintended consequences. CUNA filed its own comment letter on the standard Monday, in response to a proposed change in implementation of CECL.

“We believe it is important to delay implementation of CECL in order to allow for time to conduct a quantitative impact analysis and to consider potential alternatives, while allowing for post-issuance field testing,” the letter reads. “Time for further assessment will also allow regulators to better understand and address the key consequences of any proposal for capital and other regulatory purposes.”

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 and believes the application of CECL to credit unions is inappropriate.

“While we think CECL is a well-intended effort to provide investors with better information, certain of our members—both preparers and users of such information-- have expressed concerns that the standard will have a negative impact on long-term lending, be “procyclical” and disincentivize lending particularly during economic downturns, and will exacerbate many of the hurdles to extending credit that institutions are already facing in the wake of increased capital requirements,” the joint letter reads.

The organizations state that it is important to delay implementation of CECL in order to “allow for time to conduct a quantitative impact analysis and to consider potential alternatives, while allowing for post-issuance field testing.”