Removing Barriers Blog

NCUA Chairman Hood Calls for CUNA-sought CECL Exemption
Posted April 30, 2020 by CUNA Advocacy

NCUA Chairman Rodney Hood sent a letter to FASB urging them to exempt credit unions from complying with CECL. 

Hood’s letter states that, for most credit unions, implementing CECL will have an immediate impact on net worth, and though CECL extended implementation for credit unions by one year, credit unions are currently devoting maximum time and resources seeing members and businesses through the COVID-19 pandemic.

“I believe the compliance costs associated with implementing CECL overwhelmingly exceed the benefits,” Chairman Hood wrote. “Even before the current pandemic, credit unions had approached the NCUA with concerns about the unintended consequences of requiring credit unions to implement CECL. In our current environment, I am especially concerned that adopting CECL will have a chilling effect on lending, including loans to low-income borrowers."

“CECL is intended to address delayed recognition of credit losses resulting in insufficient funding of the allowance accounts of certain covered entities. However, underfunding of allowance accounts has not generally been an issue for credit unions. Further, the typical user of a credit union’s financial statements is not a public investor—such as with large, public banks—but instead is the credit union’s prudential regulator, the National Credit Union Administration.”

"CUNA’s longstanding position has been that credit unions should not be subject to the CECL standard, as it will both alter the financial standings of credit unions while presenting new compliance challenges, concerns shared by Chairman Hood,” said CUNA President/CEO Jim Nussle. “We thank Chairman Hood for his efforts to show FASB that CECL is inappropriate for credit unions.”