Today, CUNA filed a comment letter in support of the NCUA’s proposed
rule that would allow credit unions to phase-in over three years the day-one
adverse impact on regulatory capital that will likely result from adoption of
CECL. Consistent with regulations issued by the federal banking agencies, the
proposed rule would temporarily mitigate the adverse PCA consequences of the
day-one capital adjustments, while requiring that credit unions account for
CECL for other purposes, such as Call Reports. While consistent with the rule
recently adopted by the banking regulators, the NCUA proposal includes a few
differences.
In addition to the phase-in, the proposed rule would also
provide that credit unions with less than $10 million in assets are no longer
required to determine their charges for loan losses in accordance with GAAP (i.e.,
CECL). These credit unions would instead be able to use any reasonable reserve
methodology (incurred loss), provided that it adequately covers known and
probable loan losses. We support the NCUA using its statutory authority to
exempt credit unions under $10 million in assets.