Credit union regulator board to consider final policy statement on ACL under CECL

A final interagency policy statement in response to the impending, new “current expected credit losses” (CECL) accounting standard and addressing allowance for credit losses (ACLs) at credit unions will be considered by the federal credit union regulator board at its meeting next week.

The proposed statement was issued in October by the federal financial institution regulators, including the National Credit Union Administration (NCUA) Board. In it, the agencies described the CECL methodology for determining ACLs at the institutions they supervised that are applicable to financial assets measured at amortized cost, including loans held-for-investment, net investments in leases, held-to-maturity (HTM) debt securities, and certain off-balance-sheet credit exposures.

The proposed policy statement also included and updated “concepts and practices” detailed in existing allowance for loan and lease losses (ALLL) at their institutions that, the statement said, remain relevant under the new accounting standard.

“These concepts and practices relate to management’s responsibilities for the allowance estimation process, including the need to appropriately support and document the institution’s allowance estimates; the board of directors’ responsibilities for overseeing management’s processes; and the role of examiners in reviewing the appropriateness of an institution’s ACLs as part of their supervisory activities,” the proposal stated.

Also at next week’s credit union regulator meeting (set for 10 a.m. at the agency’s Alexandria, Va., headquarters), the board will:

  • consider a proposed rule on corporate credit unions (under part 704 of agency regulations); and
  • receive two briefings – one on credit union mortgage rates, the other a quarterly National Credit Union Share Insurance Fund (NCUSIF)report.

NCUA Board agenda, Feb. 20

Interagency Policy Statement on Allowances for Credit Losses