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NCUA issues updates to simplified CECL tool
Updates to NCUA’s simplified current expected credit losses (CECL) tool were released last week, offering credit unions the latest on weighted average remaining maturity (WARM) factors as well as minor enhancements to the tool.
Introduced in late September, the tool is intended to help credit unions comply with the Financial Accounting Standards Board’s accounting standard on CECL, which goes into effect for most credit unions Jan. 1. The updated version of the tool will help credit unions “determine the day-one adjustment to undivided earnings” as required by CECL. Of note, the day-one adjustment will be effective also on Jan. 1 and will be reported in the March 2023 Call Report.
NAFCU wrote to the NCUA in September to request that the agency issue specific guidance emphasizing that credit unions under $1 billion in assets may use the tool. The NCUA clarified that, while primarily designed for credit unions with less than $100 million in assets, any size credit union can use the tool if the tool fits the business and financial products of the credit union.
“While this tool is designed for the small credit unions, it does not preclude larger credit unions from using the tool,” said NCUA Director of the Office of Examination and Insurance Kelly Lay during a webinar to breakdown the new tool. “We made the tool flexible to allow any credit union to adopt the tool to their specific circumstances.”
NAFCU will continue to work with the NCUA to ensure that credit unions have the necessary resources and guidance to effectively implement CECL.