CECL Compliance Delayed for CUs Posted by AVCU on 12:13 PM

As reported in CU Journal today, most credit unions will see a temporary delay in having to comply with a controversial accounting standard for projected loan losses. The Financial Accounting Standards Board voted on 7/17/19 to extend the deadline for conversion to the Current Expected Credit Loss methodology to January 2023, except for the very largest publicly traded banks.

FASB is also laying plans to consult with banks registered with the Securities and Exchange Commission — those lenders must still comply next January — auditors and regulators in hopes of identifying points of confusion and unnecessary procedures.

Previouisly, smaller publicly traded banks not registered with the SEC were expected to convert to CECL in January, 2020, followed a year later by other banks and credit unions.

CECL has become a contentious topic, with detractors claiming it would divert capital away from lending and lead to longer, deeper recessions. Legislation in the House and Senate, aimed at delaying CECL until a quantitative impact study is conducted, has attracted bipartisan support.

The new standard requires lenders to forecast and reserve for lifetime credit losses as soon as they add loans to their portfolios. Under the current incurred-loss standard, lenders recognize credit losses when default becomes imminent.