June 14, 2021

NAFCU urges FASB to conduct roundtable on CECL

Friday, NAFCU President and CEO Dan Berger wrote to the Financial Accounting Standards Board (FASB) calling for a roundtable for credit unions and other small financial institutions to discuss the impacts of the adoption of the current expected credit losses (CECL) accounting methodology. CECL

In the letter, Berger noted the “[c]oncerns regarding the appropriateness of the CECL methodology for credit unions.” Berger explained NAFCU members’ interest in an opportunity to discuss their current implementation efforts and the operational challenges and unique difficulties credit unions will face when adopting this standard.

In addition, Berger highlighted the credit union difference, noting that the many ways credit unions differ from larger financial institutions which include "the industry’s record of prudent fiscal management before and after the financial crisis, limited complexity, and structure as not-for-profit, member-owned cooperatives."

"Credit unions therefore offer a unique perspective on the challenges involved in implementing CECL for financial institutions of their size," wrote Berger. "CECL implementation requires credit unions to assess trade-offs in the selection of a loss estimate methodology, which can be difficult to determine. The CECL standard will lead to increased compliance costs, both in dollars and staff time. Additionally, credit unions will need to plan for CECL’s impact on capital, as any corresponding increase in loss reserves will have a proportionate impact on net worth.”

NAFCU President and CEO Dan Berger met with FASB Chair Rich Jones in September to share the association's concerns about CECL's impact on the credit union industry. NCUA Board Member Rodney Hood, while serving as the agency's chairman, backed NAFCU's call for a credit union exemption from the standard.

The NCUA has proposed a three-year phase in of the day-one adverse impacts of CECL on federally-insured credit unions' net worth ratios, though NAFCU has advocated for a longer phase-in option and additional examination flexibility. 

Berger concluded by urging the FASB to convene a credit union focused forum to address the issues of concern.