CUNA maintains its longstanding position that the current expected credit loss (CECL) standard is inappropriate for credit unions, and backed a bill Wednesday that would require the standard to be delayed and studied by the Securities and Exchange Commission along with the federal financial regulators, including the NCUA. Sen. Thom Tillis (R-N.C.) introduced the Continued Encouragement for Consumer Lending Act (S. 1564) Tuesday.
CECL is a new accounting standard that changes the accounting for credit losses, recognizing lifetime expected credit losses instead of the current “incurred-loss” approach. CUNA is concerned with both the compliance burden the new standard will bring, as well as its effect on the financial standing of credit unions.
“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.”
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