Removing Barriers Blog

FASB Letter Gains Support of 62 Members of Congress
Posted January 29, 2016 by CUNA Advocacy

As we have previously noted, the Financial Accounting Standards Board (FASB) is in the final stages of reviewing a proposed standard that would drastically change the accounting method for assessing credit impairment. The proposal would require a forward-looking “current expected credit loss”—or CECL—model instead of the current “incurred loss” approach.  This new standard would require credit unions to hold additional capital well above their current loan loss reserves—a requirement that will have significant consequences on lending in communities. 

Along with ICBA, we’ve been pounding the pavement on Capitol Hill in the last few weeks to urge members of Congress to sign on to a letter by Representatives Tipton (R-CO) and Murphy (D-FL) to FASB Chairman, Russell Golden.  The letter has had strong bipartisan support and asks FASB to pause its current work on the standard and thoroughly evaluate the potential harm the rule change will have on financial institutions’ ability to lend.  So far, 62 Members of Congress have signed the letter and we have had positive conversations with congressional staff about the serious ramifications of the proposed standard. 

Preventing the standard from being implemented as proposed has been a top priority for us. In 2013, we filed a formal comment letter with FASB during the open comment period, we sent follow up letters in August of 2014 and February of 2015. In addition to letters, in the spring of 2013, we met with FASB Chairman Golden to ensure he and his fellow board members know exactly where we and credit unions stand on the proposal. 

In the summer of 2014, our staff and the chair of our Accounting Subcommittee, Julie Renderos of Suncoast Schools Credit Union, were invited to and participated in an all-day FASB workshop on the proposal at FASB’s headquarters in CT. The workshop provided us with another opportunity to make sure FASB staff and board members are aware of our specific concerns with the proposal. Further, we will be present at a February 4 FASB roundtable to reiterate concerns with the proposal.

In addition to FASB, we are pressuring NCUA to minimize the effects of the standard. In June of 2015, we sent NCUA Chairman Matz a letter urging the agency to recognize the significant impact the FASB standard is likely to have on credit unions and instruct field examiners to make the appropriate adjustments in assessments of capital adequacy to minimize the negative impact. We reiterated our concerns directly to Matz during NCUA’s Open Forum held last fall.

We will continue to closely monitor this issue and provide an update following next week's FASB roundtable on the proposed standard.