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TEXAS, ARKANSAS CREDIT UNIONS JOIN CUNA IN WEIGHING IN ON FASB PROPOSAL
Monday, June 3, 2013 6:30 AM

Responding to a proposal by the Financial Accounting Standards Board (FASB) related to new rules on credit impairment, dozens of Texas and Arkansas credit unions provided comments expressing grave concerns about the effect of the proposed rules on credit unions and the credit union system. At least 65 Texas credit unions provided comments, along with the Texas Credit Union League (TCUL), Arkansas Credit Union League (ACUL) and Arkansas credit union leaders.

FASB, which for 40 years has established the standards of financial accounting that govern the preparation of financial reports by non-governmental organizations, has proposed a new methodology to account for credit losses. The rules are aimed at the large, publicly-traded banks like those largely responsible for the nation’s financial crisis; they should not be extended to not-for-profit credit unions. Both CUNA and TCUL have noted that the new accounting practice could force credit unions to increase the size of their Allowance for Loan and Lease Losses (ALLL) accounts, which could drain down earnings and cause some unintended negative consequences.

As TCUL President and CEO Dick Ensweiler noted in the League’s letter to FASB, “A decrease in earnings can lead to a reduced capital ratio, which may place credit unions currently in good standing under Prompt Corrective Action as undercapitalized institutions. Such a result could force credit unions to merge or close altogether, with a particular impact on smaller credit unions.”

Ensweiler thanked all the credit union leaders who took the time to submit comments and get involved in regulatory advocacy. TCUL will continue to monitor the proposal and keep credit unions informed of further developments. To see TCUL’s comment letter, click here or to see other comments, click here .