CECL Delay & Study Bill Introduced, CUNA Offers Support

It is essential to delay the current expected credit loss (CECL) accounting standard to study its potential impact and allow consideration of other methods, CUNA wrote Tuesday in support of the CECL Consumer Impact and Study Bill of 2019, introduced by Reps. Vicente Gonzalez (D-TX) and Ted Budd (R-NC). Rep. Josh Gottheimer (D-NJ) is one of seven cosponsors of the bipartisan measure.

CECL is a new accounting standard that changes the accounting for credit losses, a standard that recognizes lifetime expected credit losses as opposed to the current “incurred-loss” approach.

The legislation would delay implementation of CECL by one year. Credit unions are expected to be in CECL compliance by Dec. 15, 2021.

“CUNA’s longstanding position has been and continues to be that application of CECL to credit unions is inappropriate. CECL is intended to address delayed recognition of credit losses resulting in insufficient funding of the allowance accounts of certain covered entities,” the letter reads. “However, underfunding of allowance accounts has not generally been an issue for credit unions. Further, the typical user of a credit union’s financial statements is not a public investor—such as with large, public banks—but instead is the credit union’s prudential regulator, the NCUA.”

This bill would also require the Securities and Exchange Commission, in consultation with the Financial Accounting Standards Board (FASB, the entity issuing CECL), to conduct a study on:

  • The potential effect CECL implementation may have on the accessibility of credit, particularly consumers and small businesses;
  • Any potential systematic risks CECL may pose during a recession;
  • The potentially disproportionate burden on smaller, less complex financial institutions; and
  • The potential competitive effect it might have on the U.S. as a result of differing international accounting standards.

CUNA and the state leagues have called on NCUA to provide credit unions with more resources to assist with CECL implementation.