Removing Barriers Blog

Board Member McWatters Shares Concerns re CECL
Posted October 09, 2019 by Chandler Schuette

Earlier this week, NCUA Board Member McWatters wrote an opinion piece in CU Journal detailing his concerns with CECL and what NCUA can do to ease credit unions’ CECL burden.

Describing CECL as “one of the most significant and far-reaching changes” to GAAP, McWatters believes CECL could cause “a significant number of credit unions [to] have their net worth fall below well capitalized or have their net worth ratios reduced to the point where they may need to curtail lending or deposit growth.”

However, McWatters goes on to note several recent developments that will help credit unions make the transition to CECL:

  • NCUA has determined the NCUA Board has the authority to provide a phase-in of CECL for regulatory capital purposes;
  • A recent FASB Q&A on CECL provides flexibility on the “reasonable and supportable forecast” required by CECL based on the size and complexity of the reporting institution; and
  • FASB’s proposed extension of the CECL effective date for credit unions until 2023.

Over the past year, we’ve been pushing NCUA to pursue a phase-in (similar to that adopted by the banking regulators). In addition, we have and will continue to advocate NCUA provide more compliance resources for credit unions.