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CUNA Says CECL Plan Must Change to Avoid Harming Economy
Friday, March 18, 2016 6:50 AM

Without simple, straightforward, but significant amendments, the Financial Accounting Standards Board’s (FASB) current expected credit loss model (CECL) will amplify risks and could result in significant economic suffering, the Credit Union National Association told FASB in a letter Thursday. CUNA and the Independent Community Bankers of America (ICBA) sent the letter to urge FASB to take into account the proposal’s impact on community financial institutions.

The CECL proposal would utilize a single “expected loss” measurement for the recognition of credit losses, which would replace the multiple existing impairment models in U.S. generally accepted accounting principles that generally use an “incurred loss” approach.

In the letter, CUNA and ICBA highlighted several accommodations that should be made in the proposal, accommodations the organizations say are “crucial to avoid great economic damage to the nation.”

Those are:

  • The final standard should specifically mandate the avoidance of day one loss recognition for community financial institutions;
  • The use of modeling tools that deviate from the community financial institution’s current techniques used in provisioning for credit losses should not be required; and
  • The final standard should include an example promoting the use of spreadsheet tools for non-complex financial institutions to bring transparency to the need for simplicity in the adoption of CECL by these community financial institutions.

CUNA continues to be a strong advocate for changes in the CECL proposal. Last week it issued an action alert to allow stakeholders to send letters to FASB Chair Russell Golden, an effort that has resulted in more than 800 letters sent in less than a week.