CECL is coming: Are you ready?

CECL among ‘most problematic, unnecessary’ requirements in recent history

October 7, 2021

The current expected credit loss (CECL) remains inappropriate for credit unions, CUNA wrote to the Financial Accounting standards Board (FASB) Wednesday. Credit unions are required to comply with CECL for fiscal years beginning after Dec. 15, 2022.

“Even though it has not yet become mandatory for credit unions, the FASB’s current expected credit losses standard continues to be one of the most problematic and arguably unnecessary regulatory requirements in recent history,” the letter reads. “CUNA has steadfastly maintained that CECL is inappropriate for credit unions.”

CECL is a new accounting standard that recognizes lifetime expected credit losses. CUNA notes that, while the standard is meant to address delayed recognition of credit losses resulting in underfunded allowance accounts, underfunding is typically not 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 (i.e., the NCUA),” the letter reads. “In addition, 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 more discerning of potential borrowers with less than perfect credit,” it adds.

If FASB is unwilling to exclude credit unions from CECL requirements, CUNA urges it to delay effective date of the standard as it applies to credit unions until the later of:

  • The end of the COVID-19 pandemic as determined by the U.S. Centers for Disease Control and Prevention or other federal entity authorized to make such a determination; or
  • Jan. 1, 2024.