Removing Barriers Blog

Letter to NCUA urging the Board to finalize interest capitalization, CECL transition
Posted May 14, 2021 by CUNA Advocacy

Yesterday, the NCUA Board released the agenda for the May Board meeting.  Following the release of the agenda, CUNA wrote to the NCUA urging the Board to finalize pending rulemakings aimed at providing credit unions regulatory relief as soon as possible.  The NCUA can provide additional regulatory relief by finalizing two outstanding rulemakings in particular: the Capitalization of Interest in Connection with Loan Workouts and Modifications proposal, and the Transition to the Current Expected Credit Loss Methodology proposal.

CUNA fully supports the capitalization of interest proposal, which would remove the existing prohibition on credit unions’ capitalizing interest in connection with loan workouts and modifications.

“The current prohibition on capitalization of interest is overly burdensome and, in some cases, may hamper a credit union’s good-faith efforts to engage in loan workouts with borrowers facing difficulty because of the economic disruption caused by the ongoing pandemic,” the letter reads. “Once adopted (and upon becoming effective), credit unions and their members will be able to begin taking advantage of the benefits of this rulemaking.”

CUNA also supports NCUA’s CECL phase-in proposal.

“We believe a three-year phase-in is appropriate. Not only does it conform with the flexibility provided by the federal banking agencies, it also provides a sufficient amount of time for credit unions to spread out the effect of the day-one adjustment,” the letter reads. “While a phase-in would not apply until the CECL standard goes into effect in January 2023, the assurance that a phase-in will occur will be helpful as credit unions continue to prepare for CECL implementation.”