WASHINGTON—NAFCU told Congress the Current Expected Credit Loss (CECL)] standard is an unnecessarily complex accounting method for credit unions and only adds to mounting regulatory stress.
The comments were included in a letter from NAFCU's Carrie Hunt to the House Financial Services subcommittee, which is holding a hearing this week to examine the standard's potential impact on financial institutions and the economy.
The CECL accounting standard issued by the Financial Accounting Standards Board (FASB) requires financial institutions – including credit unions – to record expected losses whenever they make a new loan.
“This is causing concern within the industry as it could mean financial institutions may have to either raise more capital or lend less,” NAFCU stated.
Call to Exempt CUs
"NAFCU maintains that credit unions should never have been included within the scope of the CECL standard because they were not part of the poor lending practices that precipitated the financial crisis," wrote Hunt, NAFCU's executive vice president of government affairs and general counsel. She then reiterated NAFCU's request to exempt credit unions from CECL requirements, "either by FASB or through regulatory or legislative action."
Hunt made the request in a letter to Financial Institutions and Consumer Credit Subcommittee Chairman Blaine Luetkemeyer (R-MO) and Ranking Member Lacy Clay (D-MO). She also highlighted findings from a NAFCU survey that found that credit unions expect to collect 22% more data points than they currently do under the CECL standard, and more than half believe the standard will have a negative impact on their profitability.