WASHINGTON—The Financial Stability Oversight Council (FSOC) is being pressed for a "delay in [current expected credit loss (CECL)] implementation until a transparent quantitative impact study is performed and shared with the industry."
The request was made in a letter from NAFCU, CUNA and three other financial services trade groups this week.
"While well intentioned, the [CECL] accounting standard issued by the Financial Accounting Standards Board (FASB) has the potential to disrupt lending to consumers and small businesses, increase the volatility of regulatory capital, and exacerbate procyclicality in our financial system," the groups said.
NAFCU and CUNA were joined by the American Bankers Association, Bank Policy Institute and Consumer Bankers Association in issuing the joint statement. NAFCU President and CEO Dan Berger also sent a separate letter to Treasury Secretary Steven Mnuchin ahead of the meeting to outline concerns specific to credit unions.
"For credit unions, CECL's challenges are also compounded by unique, structural limits on capital accumulation," Berger explained. "A credit union's net worth ratio is currently determined solely on the basis of retained earnings as a percentage of total assets. Furthermore, the Federal Credit Union Act provides that credit union net worth means the credit union's 'retained earnings balance, as determined under generally accepted accounting principles.' Consequently, increases to ALLL accounts resulting from CECL will likely impair the net worth – and regulatory capital ratios – of credit unions more significantly than banks."