Transition to the Current Expected Credit Loss Methodology

Transition to the Current Expected Credit Loss Methodology
Subject: CECL
Agency: NCUA
Status: Proposed rule

The NCUA Board (Board) is seeking comment on a proposed rule to address changes to the U.S. generally accepted accounting principles (GAAP). Specifically, the proposed rule would provide that, for purposes of determining a federally insured credit union’s (FICU’s) net worth classification under the prompt corrective action (PCA) regulations, the Board will phase-in the day-one adverse effects on regulatory capital that may result from the adoption of the current expected credit losses (CECL) accounting methodology. Consistent with regulations issued by the other federal banking agencies, the proposed rule would temporarily mitigate the adverse PCA consequences of the day-one capital adjustments, while requiring that FICUs account for CECL for other purposes, such as Call Reports. The proposed rule would also provide that FICUs with less than $10 million in assets are no longer required to determine their charges for loan losses in accordance with GAAP. The Board’s regulations would provide that these FICUs may instead use any reasonable reserve methodology (incurred loss), provided that it adequately covers known and probable loan losses.

FR Doc: 2020-16987
Date proposed: July 30, 2020
Comments due date: Oct. 19, 2020
Effective date:

Rule compliance date:
Agency release:

Related Reg Report item(s):

CECL’s ‘day one’ effects on credit union capital would be phased in over 3 years under proposed rule

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