June 24, 2016

With CECL finalized, agencies urge planning

Initial supervisory views regarding the implementation of the “current expected credit loss” (CECL) accounting standard -- which was finalized and released by the Financial Accounting Standards Board (FASB) last week – were issued late last week by the joint federal financial institution regulatory agencies. In a joint statement, NCUA, the FDIC, OCC and the Fed noted that the new standard (known officially as Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments) applies to all banks, savings associations, credit unions, and financial institution holding companies, regardless of asset size. The standard, the release stated, allows for various expected credit loss estimation methods and is scalable.

The new accounting standard takes effect in 2021 for most financial institutions, including credit unions. Early adoption is permitted, the joint release stated, but no earlier than 2019. The new standard is effective in 2020 for those financial institutions required to file financial statements with the Securities and Exchange Commission or the appropriate federal banking agency under the federal securities laws. “The agencies encourage financial institutions to begin planning implementation of the new standard and ensure that appropriate institution staff works closely with their senior executives and boards of directors during this transition,” the release stated. “Institutions are encouraged to plan for the potential impact of the new standard on capital in advance of the new standard’s effective date.” (Note: The NASCUS 2016 State System Summit, Oct. 5-7 in Chicago, features an in-depth session on the CECL standard and its impact on state chartered credit unions.)


Joint Statement on the New Accounting Standard on Financial Instruments - Credit Losses

NASCUS 2016 State System Summit (Chicago, Oct. 5-7)/information, registration


Two privately insured credit unions have been cleared to join the Federal Home Loan Bank (FHLB) system over the last several days, and more may be on the way. Beacon Credit Union of Wabash, Ind., with $1.2 billion in assets, was the first privately insured credit union approved for FHLB membership, joining the Indianapolis FHLB June 3. And last week, Credit Union 1 of Rantoul, Ill., with $785 million in assets, was approved for membership in the FHLB of Chicago, according to American Share Insurance (ASI) in a release dated June 16. Privately insured credit unions were given access to join the FHLB with the enactment in December of the FAST Act (H.R. 22). ASI is urging credit unions interested in FHLB membership to contact the FHLB branch serving their particular markets. ASI also reported that other privately insured credit unions in Ohio, Illinois, Indiana, Texas and California have applications pending for membership through their respective FHLB branch banks.


Contact information on each of the seven affected FHLB banks


NCUA’s call for authority to oversee third-party vendors is reaffirmed in the 2016 annual report by the Financial Stability Oversight Council (FSOC), NCUA Board Chairman Rick Metsger said in a statement this week. “While other federal financial institution regulators already have third-party authority, NCUA’s lack of vendor authority with respect to cybersecurity and other threats creates a vulnerability within the financial system and limits the agency’s ability to better protect credit unions, their members and the Share Insurance Fund,” Metsger stated. NASCUS supports the agency obtaining examination authority over technology service providers (TSPs) that provide services to FISCUs -- provided that any such authority requires NCUA to rely on state examinations of such service providers where such authority exists at the state level. At least 18 states have that authority now. (Note: The NASCUS/CUNA Cybersecurity Symposium, Aug. 1-2 in Chicago, will offer a complete picture of cybersecurity issues, including risk assessment, threat intelligence capability and steps to take to improve information security. See below for more on hotel cutoff!)

Metsger statement on third-party vendor authority

FSOC Annual Report (with reference to vendor oversight authority)


Use of federal funds for penalizing financial institutions that provide marijuana business banking services in various states would be blocked under an amendment to a spending bill approved by the Senate Appropriations Committee last week. The amendment from Sens. Jeff Merkley (D-Oregon) and Patty Murray (D-Wash.) was adopted by the committee to the appropriations bill it was considering for funding for financial services and general government (otherwise known as the FSGG bill). Oregon and Washington have both legalized the sale of marijuana and both Colorado and Alaska have approved recreational use; 25 states have now legalized either recreational or medicinal use. Specifically, the amendment would prevent federal banking regulators from prohibiting, penalizing or discouraging a bank from providing financial services to a legitimate state-sanctioned and regulated marijuana business. According to a release issued by the two senators, the next step for the measure (passed on a bipartisan vote of 16-14, they stated) is the Senate floor.


Merkley-Murray release about passage of marijuana business banking amendment


All federal credit unions – not just those with multiple-group designations -- would have the power to add underserved areas to their fields of membership under legislation introduced this week by a trio of Democratic lawmakers. (According to preliminary results of NASCUS’ 2016 State System Profile, at least 11 states already allow state-chartered credit unions to add “underserved” areas regardless of their existing FOMs.) The “Financial Services for the Underserved Act” (H.R. 5541) would allow any FCU (other than only a multiple-group charter) to seek the NCUA Board’s approval to add underserved areas. The legislation would require the credit unions to have a method for servicing the underserved areas within 24 months. Democratic Reps. Tim Ryan (Ohio), Don Norcross (N.J.) and Ann Kirkpatrick (Ariz.) are the original co-sponsors.


Representing their respective NCUA regions, five state regulators will provide input to the internal working group for NCUA’s "Exam Cycle/Exam Flexibility Initiative," which was announced by Chairman Rick Metsger last month. The SSAs are: Kim Santos, Director, Wisconsin Office of Credit Unions (Region I); Robert Rutkowski, Deputy Superintendent for Credit Unions, Ohio Division of Financial Institutions (Region II); Sarah H. Moore, Administrator, Alabama Credit Union Administration (Region III); Robert Etheridge, Deputy Commissioner, Texas Credit Union Department (Region IV), and; Mary Hughes, Financial Institutions Bureau Chief, Idaho Department of Finance (Region V). Industry groups made up of state-chartered CUs and FCUs have also been formed by the agency. NCUA Region IV Director C. Keith Morton is spearheading the project for NCUA. Meanwhile, the agency this week announced an extension to Aug. 15 of its due date for comments on what areas of the 5300 call report and 4501A profile forms prove challenging and should be made optional for smaller credit unions. The call report comment period is part of NCUA Chairman Metsger’s initiative to modernize the examination and supervision program.

BRIEFLY: Lots of CFPB activity; Cyber hotel cutoff July 1; new committee member

Take a look at our CFPB pages and see all of the activity from the bureau over the last week or so, including: mortgage servicer exam manual updated, TILA threshold proposals, and CMP adjustments … Hotel cutoff date for the 2016 Cybersecurity Symposium is NEXT WEEK (July 1); see the link below to secure your reservation … Welcome to Dawn McCaskill (GA) to the NASCUS/ NCUA National Examination Committee, which gathers comments from examiners about the examiners’ guide, exam process, and procedures, emerging issues affecting the exams and more. NASCUS representatives on the NEC are Edward Schutte (OR) and Denise St. Pierre (NH); a special thanks to Lori Jones (OH) for serving on the committee for the past three years.


NASCUS CFPB information center

2016 Cybersecurity Symposium/agenda and registration

Cybersecurity Symposium, Aug. 1-2

Information Contact:
Patrick Keefe, NASCUS Communications, pkeefe@nascus.org or (703) 528-5974