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Matz Urged to Assure NCUA Will Strive to Minimize CECL Burden
Wednesday, February 10, 2016 6:40 AM

The Credit Union National Association seeks assurance from the National Credit Union Administration that the agency will work with credit unions as they work to comply with a pending current expected credit loss (CECL) proposal. CUNA wrote to NCUA Chair Debbie Matz Friday regarding the CECL proposal, which is being put forth by the Financial Accounting Standards Board (FASB).

The proposal, expected to be finalized during the first half of this year, would require credit unions to utilize a CECL model on all financial assets and financial liabilities. This would have a dramatic impact on credit unions, primarily due to a change that would require them to hold much more in reserved for future possible loan losses.

“We urge NCUA to assure credit unions that the agency will strive to minimize the regulatory burden of the standard, as well as reduce the unnecessary financial impact the standard will impose on credit unions,” wrote CUNA President/CEO Jim Nussle. “To be clear, CUNA does not believe the CECL model is appropriate for credit unions, and we believe the accounting changes of the standard will severely increase credit unions’ allowances for loan and lease losses."

"However," Nussle added, "the impact of the standard on credit unions will be more manageable if they are not required to utilize sophisticated computer programs to determine credit impairment."

Nussle also reiterated concerns that he raised in a June 2015 letter to Matz, where he urged the NCUA to help blunt the impact of FASB’s proposal.

“We continue to believe that, while the proposal will in no way change today’s economic reality, it will result in lower apparent capital ratios at credit unions and banks,” Nussle wrote. “Therefore, we urge NCUA to work with its Office of Examination and Insurance to instruct examiners to make the appropriate adjustments in assessments of capital adequacy in order to minimize the negative impact on credit unions."