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NAFCU is currently seeking comment from member credit unions on the NCUA's recently proposed rule to create a three-year phase-in of the day-one adverse impacts of the current expected credit loss (CECL) accounting standard on federally-insured credit unions' (FICUs) net worth ratio. Of note, the standard isn't effective for credit unions until 2023.

NCUA Board Chairman Rodney Hood previously announced the agency's authority to phase in the CECL standard during NAFCU's Congressional Caucus last year. More recently, Hood in April backed NAFCU's call for an exemption for credit unions under the standard, arguing that its compliance costs outweigh its benefits.

Through a new Regulatory Alert, NAFCU highlights that the rule, as proposed, would:

• only be applied to those FICUs that adopt the CECL standard for fiscal years beginning on or after December 15, 2022;
• supplement nominal retained earnings and total assets with a "transitional amount," generally measured as the difference between pre-CECL and post-CECL retained earnings; and
• exempt FICUs with less than $10 million in assets from complying with Generally Accepted Accounting Principles in determining their charges for loan losses and, instead, permits these FICUs to use any reasonable reserve methodology to cover known and probably loan losses.

The association would like members' feedback on whether:

• the proposed calculation of the transitional amount provides meaningful capital relief in the period after the adoption of the CECL standard;
• the phase-in period should be longer; and
• credit unions anticipate future strains on capital that might make the transition difficult when the CECL standard take effect.

NAFCU maintains that credit unions should not be subject to CECL – NAFCU President and CEO Dan Berger sent a letter to FASB's new chairman last month outlining credit unions' concerns – and will continue to work with FASB and the NCUA to obtain relief for the industry.

Amid the coronavirus pandemic, NAFCU, NCUA, and lawmakers have voiced concerns about the standard hindering financial institutions' ability to lend effectively during the recovery. While the CARES Act provided temporary relief under CECL through the end of the year, NAFCU continues to advocate for extended relief.

In addition, NAFCU has numerous resources available to credit unions as they prepare to implement the standard.

For more on the proposed rule, including what it means for credit unions and an in-depth analysis, view the Regulatory Alert. Comments are due to NAFCU Oct. 1. Comments are due to the NCUA 60 days after publication in the Federal Register.