NCUA should finalize interest capitalization, CECL transition

May 13, 2021

NCUA should finalize pending rulemakings aimed at providing credit unions regulatory relief as soon as possible, CUNA President/CEO Jim Nussle wrote members of the NCUA board Thursday. Nussle also thanked NCUA for the steps it has taken over the past year to address pandemic-related pressures on credit unions.

“The NCUA can provide additional regulatory relief by finalizing two outstanding rulemakings in particular: the Capitalization of Interest in Connection with Loan Workouts and Modifications proposal, and the Transition to the Current Expected Credit Loss Methodology proposal,” the letter reads. “Given the urgency of the pandemic, the ensuing economic crisis, and the adverse impact these events are having on consumers’ financial well-being, we strongly urge the Board to approve these proposals as soon as possible.”

CUNA fully supports the capitalization of interest proposal, which would remove the existing prohibition on credit unions’ capitalizing interest in connection with loan workouts and modifications.

“The current prohibition on capitalization of interest is overly burdensome and, in some cases, may hamper a credit union’s good-faith efforts to engage in loan workouts with borrowers facing difficulty because of the economic disruption caused by the ongoing pandemic,” the letter reads. “Once adopted (and upon becoming effective), credit unions and their members will be able to begin taking advantage of the benefits of this rulemaking.”

CUNA also supports NCUA’s CECL phase-in proposal.

“We believe a three-year phase-in is appropriate. Not only does it conform with the flexibility provided by the federal banking agencies, it also provides a sufficient amount of time for credit unions to spread out the effect of the day-one adjustment,” the letter reads. “While a phase-in would not apply until the CECL standard goes into effect in January 2023, the assurance that a phase-in will occur will be helpful as credit unions continue to prepare for CECL implementation.”