Removing Barriers Blog

CUNA Urges NCUA to Work with FASB to Improve Pending Credit Impairment Proposal
Posted June 30, 2015 by CUNA Advocacy

Jim Nussle sent a letter to Chairman Matz to ensure NCUA is aware of CUNA’s continuing grave concerns regarding the Financial Accounting Standards Board’s (FASB) pending rule change on accounting for credit impairment. The pending change, which was proposed in December 2013 and is expected to be finalized by the end of this year, will require credit unions to utilize a current expected credit loss (CECL) model on all financial assets and financial liabilities. This approach will have a dramatic impact on credit unions, due primarily to a change that will require them to hold much more in reserves for future possible loan losses.  

While the proposal will in no way change economic reality, it will result in lower apparent capital ratios at credit unions and banks. Therefore, we urge NCUA to work with its Office of Examination and Insurance to instruct examiners to make the appropriate adjustments in assessments of capital adequacy in order to minimize the negative impact on credit unions. In addition, we believe it is critical that NCUA work together with FASB as it finalizes these changes.

For more information, please contact Luke Martone.