ALEXANDRIA, Va.–With two long-time priorities on the agenda of this week’s NCUA board meeting, both NAFCU and CUNA are eager to see what the agency has planned for regulations around CECL and the capitalization of interest.
NAFCU’s EVP and general counsel, Carrie Hunt, said the two issues are of equal importance to the group, noting NAFCU has led the charge on the capitalization of interest rule.
“We are happy to see NCUA moving forward to finalize,” said Hunt.
Luke Martone, senior director of advocacy and counsel with CUNA, said the trade group has also been pushing NCUA to pursue changes, as it would assist loan workouts and modifications.
“The current regulation is overly burdensome, and, in some cases, we believe it makes it more difficult to engage in loan workouts with borrowers,” said Martone.
CECL on Agenda
Also, on the meeting agenda is CECL, which has been in discussions for years at NCUA and the Financial Accounting Standards Board (FASB), which administers rules related to the accounting standard.
“Having a rule to finalize the three-year phase-in gives credit unions some certainty to continue to work on,” said Hunt. “Until FASB changes the CECL rule altogether, and the likelihood is small, having some direction is great.”
Hunt said the feedback from NAFCU members related to CECL continues to be uncertainty around the appropriate level of reserves “and what that means in terms of deploying capital. It’s just balance sheet management. If it’s unnecessarily burdensome and having to go above and beyond with all these hoops to jump through on modeling, what’s the purpose?”
Martone noted CUNA has also been pushing NCUA for at least two years for a final rule on the phase-in of CECL, the effective date of which is 2023.
“Credit unions are making a lot of progress in getting changes necessary for compliance,” he said. “We continue to encourage NCUA to do more in terms of providing compliance materials and other resources.”
Interest Rate Ceiling
The final item on this week’s NCUA agenda has to do with the federal credit union loan interest rate ceiling.