Removing Barriers Blog

NCUA’s CECL Phase-in Proposal

NCUA is accepting comments until 10/19 on its proposal to 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. Some states have statutory or regulatory provisions that require all FISCUs to comply with GAAP. FISCUs under $10 million in those states would not benefit from the proposed relief. Here is a list of GAAP requirements by state. Some states clearly require GAAP and others clearly do not. However, for a number of states it is unclear whether FISCUs are currently required to follow GAAP. We are still revising the list, so please share any info you have regarding application of GAAP (to credit unions under $10 million) in any of the “unclear” states. Thank you.

Here is CUNA’s summary of the proposal.