By Ray Birch
WASHINGTON—The one-year delay for credit unions of CECL’s implementation date is likely not an indication FASB is considering exempting CUs from compliance. Instead, say experts, what the additional time will do is help credit unions better prepare for the guidelines and also learn from others.
As CUToday.info reported, the Financial Accounting Standards Board has proposed a delay in the implementation date for its new current expected credit loss (CECL) standard for an additional year for credit unions, pushing back the compliance date until 2023.
For large public banks, which FASB defines as SEC filers excluding small reporting business entities, CECL would still take effect in the fiscal year and interim periods beginning after Dec. 15, 2019.
Where credit unions could benefit the most from the delay, said Luke Martone, CUNA senior director of advocacy and Council, is leaning from how the large banks implement CECL, even if they are very different operations.
Lessons to be Learned
“While some CECL issues that the big banks encounter may not apply to credit unions, there may be some recurring issues that will be common among all financial institutions that will be unearthed over the next few years that credit unions can learn from,” said Martone. “In that respect, I certainly think the one-year extension will be helpful.”
Luke Martone, CUNA
Both Martone and NAFCU Chief Economist and Vice President of Research Curt Long told CUToday.info they believe the Financial Accounting Standards Board is not considering any exemption for credit unions from CECL.
“We would like to think FASB is considering exempting credit unions,” said Long. “But ultimately, we think this will be just a one-year delay. We appreciate FASB considering credit unions’ concerns and moving forward with a delay of the CECL standard and committing itself to conducting a cost-benefit analysis to better understand this new standard’s impact on consumers, credit unions and the economy as a whole. NAFCU will continue to advocate for credit unions to be exempt from this onerous and costly accounting standard.”
Congress Could Act, But…
Similarly, Martone said the delay does not change CUNA’s perspective on FASB’s intent to have CUs comply with CECL, adding the delay might give Congress more time to consider some sort of legislation.
“But I would think that may not happen either, as the big entities are being required to comply as scheduled,” said Martone. “So that one-year extension I don't think really does much to help with a potential stop and study bill since the banks will be complying. The delay does not alter my perspective on whether there will be any major changes or potential exemptions from CECL for credit unions.”
No Time to Procrastinate
Long insisted credit unions should not use the extra time to procrastinate.
“They should not see this as giving them one year off from having to comply,” said Long. “They should not put off compliance efforts and should continue moving forward with their plans.”
Martone agreed.
Curt Long, NAFCU
“I don't want to use the term breathing room, because I don't think it's an opportunity for credit unions to sit back and not do anything,” said Martone. “But I think the extra year may reduce some of the stress credit unions may be feeling from CECL. They can take another year to implement it. I think credit unions really need to take advantage of this additional time and continue their compliance efforts.”
Long noted that CECL will have an impact on credit unions’ capital levels and that the time to boost reserves, if necessary, is very limited.
“Building capital through retained earnings takes time,” said Long. “So, getting an extra year to build up capital between now and the effective date is helpful...There are a lot of moving parts to an issue of this size, and it’s never a bad things to get a little more breathing room to address issues that arise you did not foresee.”
Still a Proposal
Martone reminded at this point the delay isn’t carved on a stone tablet.
“This, technically, is a proposed delay,” said Martone. “Once FASB comes out with formal language for the proposal, we will be thoroughly looking at, communicating with our credit unions, and weighing in with FASB. As we have stated, CUNA has underlying concerns with CECL’s impact on credit unions and our thoughts are it should not apply to credit unions. So while this delay is good, and it will be helpful to credit unions, it still just delays the inevitable of complying with CECL.”