ARLINGTON, Va. –While saying it is generally supportive of NCUA’s efforts to mitigate the day-one effect of the current expected credit loss (CECL) methodology on capital levels, the National Association of State Credit Union Supervisors (NASCUS) said it would like to see several changes made to the proposal.
In a comment letter to NCUA, NASCUS’ list of recommendation includes:
- Very small credit unions (those with less than $10 million in assets) that implement CECL should be given the option to phase in the day-one effect
- Credit unions that reach $10 million in assets after Jan. 1, 2023, should be afforded the opportunity of a three-year phase in of the day-one effect
- Credit unions with assets of $10 million or greater should have the option of recognizing the full day-one effect of CECL immediately
- NCUA should consider how CECL will be incorporated into stress testing requirements after implementation
The Concerns
“NASCUS, many state credit union regulators, and many state credit union system stakeholders remain concerned that the CECL methodology will be counter-productive when implemented for the credit union system,” NASCUS said in its letter. “We agree with the sentiments expressed and specific points raised by Chairman (Rodney) Hood in the Chairman’s April 30, 2020 letter to the FASB. We encourage NCUA to continue efforts to engage with the FASB to remediate this issue.”
In addition, NASCUS said NCUA should also consider how CECL will be incorporated into stress testing requirements after implementation.
“While not germane for this rulemaking, NASCUS notes that implementation of CECL could potentially impact stress testing before January 1, 2023…“Incorporating CECL into the stress testing regimen will increase capital volatility within the modelling and complicate stress testing estimations. It is our understanding NCUA has begun to address some of these issues with covered credit unions required to conduct stress testing. We urge NCUA to continue these discussions, including with state regulators, to ensure the regulatory stress testing framework can incorporate CECL when appropriate.”