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.