ARLINGTON, Va.—A proposed interagency policy statement CECL will do little to alleviate the future cost, disruption, and uncertainty associated with the most significant accounting change in decades, according to an analysis by NAFCU.
In its comment letter, Andrew Morris, NAFCU's senior counsel for research and policy, offered the association’s feedback on the proposed policy statement on allowances for credit losses (ACLs) to the NCUA directly. NAFCU said it maintains credit unions should not be subject to CECL due to the negative impact it will have on institutions' capital, and further recommended the Financial Accounting Standards Board (FASB) consider less burdensome alternatives for the industry and work with NCUA to provide more resources for credit unions.
The NCUA's fall rulemaking agenda indicates a proposed rule early next year that is expected to adopt a phase-in of CECL's negative impact on credit union net worth ratios, NAFCU noted.
‘Modest’ Improvement, But…
In the letter, Morris acknowledged the proposed statement does "modestly [improve] understanding of supervisory expectations surrounding implementation of [CECL]." However, he specifically requested "the NCUA develop its own, tailored guidance for credit unions to clearly communicate examiner expectations well in advance of CECL's 2023 compliance date."
In addition, Morris recommended the proposed policy statement should:
- Include practical examples to illustrate how credit unions can comply with CECL using simplified models
- Clarify that deference to managerial judgment encompasses the decision to rely on independent auditors to validate ACL measurement