NASCUS RECOMMENDS CHANGES TO NCUA PROPOSAL ON TRANSITION TO CECL METHODOLOGY (Oct. 20)

NASCUS, in a comment letter to NCUA, wrote in support of the agency’s efforts to mitigate the day-one effect of the current expected credit loss (CECL) methodology on capital levels while ensuring allowance accounts are appropriately funded, financials accurately reported, and the credit union system maintained in a safe and sound manner.

However, the state credit union system also recommended several changes to the proposal before it is finalized; among them:

• Very small credit unions (those with less than $10 million in assets) that implement CECL should be given the option to phase in the day-one effect;
• Credit unions that reach $10 million in assets after Jan. 1, 2023 should be afforded the opportunity of a three-year phase in of the day-one effect;
• Credit unions with assets of $10 million or greater should have the option of recognizing the full day-one effect of CECL immediately;
• NCUA should consider how CECL will be incorporated into stress testing requirements after implementation.

“NASCUS, many state credit union regulators, and many state credit union system stakeholders remain concerned that the CECL methodology will be counter-productive when implemented for the credit union system,” NASCUS stated in concluding its letter. “We agree with the sentiments expressed and specific points raised by Chairman Hood in the Chairman’s April 30, 2020 letter to the FASB. We encourage NCUA to continue efforts to engage with the FASB to remediate this issue.”

Click here to read the full contents of the NASCUS comment letter.