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NAFCU President and CEO Dan Berger sent a letter to new Financial Accounting Standards Board (FASB) Chairman Richard Jones outlining the association's concerns with the impact the current expected credit loss (CECL) standard will have on credit unions and urging an exemption for the industry.

"Although NAFCU appreciates the one-year delay of the adoption of CECL for non-public business entities adopted in October 2019, the COVID-19 pandemic and current economic crisis have highlighted apprehensions about the appropriateness and efficacy of CECL implementation for not-for-profit, member-owned cooperative financial institutions," Berger wrote. "As such, credit unions are not publicly traded and do not have equity investors. The CECL standard was intended to better protect such investors and preserve the health of the financial system. The National Credit Union Administration (NCUA) ensures the safety and soundness of credit unions and guarantees that the type of risks that led to the 2008 financial crisis, which credit unions had no part in, are not present in the credit union system.

"Given the unique nature of credit unions as non-public financial institutions, FASB should exempt credit unions from the CECL standard," Berger added.

Berger also cited concerns about procyclicality and the standard’s propensity to exacerbate capital and liquidity issues during economic downturns as well as lawmakers’ calls for additional studies on the impact of CECL.

Amid the coronavirus pandemic as millions of Americans face financial hardships, Berger noted credit unions' efforts to provide financial relief.

"Given the high degree of economic uncertainty and credit unions’ conservative tendencies, CECL’s forecasting requirement is likely to lead to upwardly-biased loss estimates," Berger argued. "This could severely tighten credit conditions and reduce access to credit, which could disproportionately affect low- and moderate-income individuals most impacted by the COVID-19 pandemic. This not only runs counter to CECL’s goal of establishing economic stability but could also amplify and extend the impacts of the current economic crisis."

While the CARES Act provided temporary relief under CECL through the end of the year, the standard isn't effective for credit unions until 2023; NAFCU continues to advocate for extended relief. The NCUA next week is set to propose a phase-in transition plan for credit unions to implement CECL; NCUA Chairman Rodney Hood in April backed NAFCU's call for an exemption for credit unions under the standard, arguing that its compliance costs outweigh its benefits.

NAFCU maintains that credit unions should not be subject to CECL and will continue to work with FASB and the NCUA to obtain relief for the industry. The association has numerous resources available to credit unions as they prepare to implement the standard.