Credit union regulator becomes latest to urge exemption from CECL accounting standard

The federal credit union regulator became the latest to call for an exemption for the institutions he supervises from new accounting rules requiring estimation of expected losses over the life of loans, known as the current expected credit losses (CECL) accounting standard.

In a letter to the Financial Accounting Standards Board (FASB, the private groups that sets standards for the accounting profession), National Credit Union Administration (NCUA) Board Chairman Rodney E. Hood urged the exemption for credit unions. Federal Deposit Insurance Corp. (FDIC) Chairman Jelena McWilliams penned a similar letter in March calling for an exemption for banks.

“I believe the compliance costs associated with implementing CECL overwhelmingly exceed the benefits,” Hood wrote. “In our current environment, I am especially concerned that adopting CECL will have a chilling effect on lending, including loans to low-income borrowers.” Hood also asserted that, for most credit unions, “implementing CECL will have an immediate negative impact on net worth.”

The NCUA chairman told the accounting group that the agency uses the incurred loss model when it supervises and examines credit unions, which Hood said nearly 70% of which hold less than $100 million in assets. Additionally, he indicated that the CECL approach would not work for smaller credit unions. “Attempting to recognize all expected credit losses, even using the weighted average remaining maturity method, is fraught with data collection challenges for the smallest of our supervised credit unions,” he wrote.

Hood letter to FASB Urging CECL Exemption for Credit Unions