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NAFCU Regulatory Affairs Counsel James Akin wrote to NCUA Acting Chief Accountant Chris McGrath, urging the agency to provide additional clarity and guidance regarding the recently-introduced simplified current expected credit losses (CECL) tool. The NCUA created the NAFCU-supported tool to “help small credit unions comply with the Financial Accounting Standards Board’s accounting standard on CECL, which goes into effect for most credit unions at the start of 2023.”

In the letter, Akin highlighted that NAFCU supports the introduction of the Simplified CECL Tool as a cost-effective resource for credit unions to implement CECL. However, he offered a few recommendations for the agency to consider, noting:

• while the tool may be ideal for use by credit unions under $100 million in assets, the NCUA should issue guidance indicating that it can be used by credit unions up to $1 billion in assets;
• the NCUA should issue guidance about what factors and modifications credit unions between $100 million and $1 billion should consider in utilizing the tool; and
• the NCUA should avoid requiring credit unions to hire third parties to validate their CECL model; and
• the NCUA should issue guidance ensuring that credit unions have the same level of flexibility when validating the credit union’s allowance for credit losses methodology, as they did when validating their Allowance for Loan and Lease Losses methodology.

“NAFCU would like to thank the NCUA for its continued focus on providing credit unions with the tools and resources to implement CECL,” concluded Akin. “Thank you for your consideration and we look forward to working with you to make CECL transition simple for credit unions.”

To learn more on the CECL standard, read NAFCU’s Resources. NAFCU will continue to work with the NCUA to ensure that credit unions have the necessary resources and guidance to effectively implement CECL.