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In a Regulatory Alert, NAFCU outlines the proposed interagency policy statement related to the current expected credit loss (CECL) standard, specifically seeking feedback on supervisory expectations, and the proposed guidance on credit risk review systems.

Federal financial regulators, including the NCUA, issued the proposal following the Financial Accounting Standards Board's (FASB) decision to move forward with an additional year delay of CECL. Once the final accounting standards update is published, credit unions' compliance date will be 2023.

The proposed interagency policy statement describes regulatory expectations for an institution upon adoption of CECL and explains the responsibilities of management and the board of directors when determining allowances for credit losses (ACLs) under Generally Accepted Accounting Principles (GAAP). It would become effective at the time of each institution's adoption of CECL.

Additional details for the separately proposed statement and guidance can be found in NAFCU's Regulatory Alert.

NAFCU recommends credit unions "review the proposed Statement and Guidance to understand how estimates, valuations and other judgments related to ACLs and credit risk review systems will need to be documented and governed."

NAFCU maintains that credit unions should not be subject to CECL due to the negative impact it will have on institutions' capital. The association will continue to ask FASB to consider less burdensome alternatives for the industry and work with the NCUA to provide more resources for credit unions.

Credit unions can submit feedback on the proposed interagency policy statement and guidance on credit risk review systems through NAFCU's Regulatory Alert until Nov. 25; comments are due to the NCUA Dec. 16.