ARLINGTON, Va.—NAFCU is calling on the Financial Accounting Standards Board (FASB) to hold a roundtable for credit unions and other small financial institutions to discuss the impacts of the adoption of the current expected credit losses (CECL) accounting methodology.
In a letter to FASB, NAFCU President and CEO Dan Berger noted the “concerns regarding the appropriateness of the CECL methodology for credit unions.” Berger shared NAFCU members’ interest in an opportunity to discuss their current implementation efforts and the “operational challenges and unique difficulties credit unions will face when adopting this standard.”
In addition, Berger also sought to again remind FASB of the credit union difference, noting that the many ways credit unions differ from larger financial institutions, including "the industry’s record of prudent fiscal management before and after the financial crisis, limited complexity, and structure as not-for-profit, member-owned cooperatives."
‘Unique Perspective’
"Credit unions therefore offer a unique perspective on the challenges involved in implementing CECL for financial institutions of their size," wrote Berger. "CECL implementation requires credit unions to assess trade-offs in the selection of a loss estimate methodology, which can be difficult to determine. The CECL standard will lead to increased compliance costs, both in dollars and staff time. Additionally, credit unions will need to plan for CECL’s impact on capital, as any corresponding increase in loss reserves will have a proportionate impact on net worth.”
As CUToday.info has reported, NCUA has proposed a three-year phase in of the day-one adverse impacts of CECL on federally-insured credit unions' net worth ratios. NAFCU has advocated for a longer phase-in option and additional examination flexibility.
Berger concluded by urging the FASB to convene a credit union focused forum to address the issues of concern.