Removing Barriers Blog

NCUA Proposed Rule on Transition to the Current Expected Credit Loss Methodology
Posted August 27, 2020 by dyi

The NCUA is looking for comments on their proposed rule that would, for purposes of determining a credit union’s net worth classification under PCA, have them phase-in the day-one adverse effects on regulatory capital that may result from adoption of CECL. Consistent with regulations issued by the other federal banking agencies, the proposed rule would temporarily mitigate the adverse PCA consequences of the day-one capital adjustments, while requiring that FICUs account for CECL for other purposes, such as Call Reports.
The proposed rule would also provide that FICUs with less than $10 million in assets are no longer required to determine their charges for loan losses in accordance with GAAP. 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.

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