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NAFCU, trades urge CECL delay
Citing compliance concerns, NAFCU and eight other financial services industry trade groups are urging the Financial Accounting Standards Board (FASB) to delay the implementation of its current expected credit loss (CECL) standard. NAFCU also recently reiterated to FASB its belief that credit unions should be exempt from the standard.
In a letter to FASB and the Securities and Exchange Commission (SEC), which has primary oversight of FASB, the trade groups argued that a delay would give companies more time to consider alternatives and conduct a quantitative impact analysis.
"Time for further assessment will also allow regulators to better understand and address the key consequences of any proposal for capital and other regulatory purposes," they added.
In addition, the trades acknowledged FASB's intention to "provide investors with better information," but highlighted a number of concerns with CECL's impact, including:
- a negative impact on long-term lending;
- being "procyclical" and disincentivizing lending particularly during economic downturns; and
- exacerbating many of the hurdles of extending credit institutions already face in the wake of increased capital requirements.
NAFCU has devoted considerable time and resources to educate credit unions on CECL requirements, and to share the industry's concerns with FASB. Credit unions' unique capital framework limits the NCUA's ability to mitigate CECL's effect on institutions' net worth without action from FASB.
The association has also shared concerns with lawmakers, the NCUA and Federal Reserve, and has worked to obtain certain changes and more guidance on the standard.