CECL

Recent Activity

Many are calling CECL the most significant change in accounting rules to hit the financial services industry in decades. The CECL standard will lead to increased compliance costs – both in dollars and staff time – that many credit unions cannot afford. NAFCU has conducted studies and provides numerous resources for its credit union members as the CECL implementation deadline draws nearer.

NAFCU is committed to making its members’ concerns heard before FASB, NCUA, other relevant regulators, and even Congress. Recently, NAFCU wrote a letter to the NCUA detailing its work to help credit unions and asking the agency to work closely with FASB to provide more resources for credit unions. NAFCU also wrote to the Federal Reserve, Treasury Secretary Mnuchin for a recent meeting of the Financial Stability Oversight Counsel, and Congress.

NAFCU is committed to making its members’ concerns heard before FASB, the NCUA, other relevant regulators, and even Congress.

  • In April 2019, NAFCU met with NCUA Board Member Todd Harper and discussed credit union concerns with CECL, s well as the need for CECL guidance and education from the NCUA.
  • In February 2019, NAFCU wrote to FASB asking for CECL relief for credit unions because credit unions have a unique capital framework and face certain regulatory constraints.
  • NAFCU wrote to the NCUA, detailing NAFCU’s work to help credit unions and asking the agency to work closely with FASB to provide more resources for credit unions.
  • NAFCU has met with the Federal Reserve to reiterate credit union concerns with CECL.
  • NAFCU wrote to Treasury Secretary Mnuchin ahead of a meeting of the Financial Stability Oversight Counsel (FSOC), asking the FSOC to consider the implications of CECL and delay implementation.
  • Ahead of a recent Congressional hearing on the impact of CECL, NAFCU called for Congress to exempt credit unions from CECL.

FASB historically has been reluctant to create exemptions from its accounting standards. At this time, CECL will go into effect for both banks and credit unions. Nevertheless, as a result of NAFCU's efforts, some flexibility in the standard has been achieved: FASB issued a final update in November 2018 to clarify the effective date for its CECL standard, making clear that credit unions would not need to begin reporting data on call reports until the beginning of 2022. The update also clarified that operating lease receivables are not covered within the scope of CECL – a clarification welcomed by NAFCU.

In April 2019, FASB issued an update with CECL amendments related to measurement and presentation of available for sale debt securities within the scope of CECL. The update also clarified guidance related to when an entity should include recoveries when estimating the allowance for credit losses. Also in April 2019, FASB announced that it would not move forward with a proposal put forward by a group of banks outlining an alternative to the income statement impact of the standard that would have provided institutions with additional flexibility. NAFCU remains engaged in evaluating any proposals that emerge and will work with the NCUA and FASB to determine whether these alternatives could help alleviate some of the negative impacts of the CECL standard.

Financial regulators, including the NCUA, released a new CECL FAQ document to help institutions implement the standard, and held an “Ask the Regulators” webinar to address implementation concerns. Furthermore, the banking regulators recently announced the option to phase-in over a three-year period the day-one effects of the CECL standard on regulatory capital. NAFCU will advocate for parity for credit unions in all beneficial changes regarding the implementation of the CECL standard.