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Chorus grows for CECL delay as coronavirus spreads

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Federal Deposit Insurance Corp. Chairman Jelena McWilliams has joined a growing chorus of voices seeking a delay of a controversial accounting rule for anticipated loan losses.

McWilliams on Thursday called on the Financial Accounting Standards Board to let banks that are subject to the Current Expected Credit Losses standard to postpone implementation due to challenges created by the coronavirus outbreak.

She also asked FASB to impose a moratorium on the effective date for banks and credit unions that are otherwise required to convert to the standard in January 2023.

“In view of the unprecedented challenges, FDIC is concerned that the scheduled introduction of recently enacted accounting standards may strain the ability of financial institutions to serve their depositors and prudently meet the credit needs of their communities,” McWilliams wrote in a letter to Shayne Kuhaneck, the FASB’s acting technical director.

FDIC Chairman Jelena McWilliams wants FASB to suspend implementation of a new accounting standard for expected loan losses.

Lawmakers and financial industry trade groups have ramped up opposition to CECL since the onset of the pandemic. McWilliams is the first regulator to express support for halting implementation.

A FASB spokeswoman said Thursday afternoon that it was reviewing McWilliams letter.

On Monday, the Credit Union National Association called for pushing back CECL’s effective date for credit unions by a year, until January 2024. The National Credit Union Administration did not immediately return a request for comment on whether CECL should be delayed because of the pandemic.

The American Bankers Association announced its support Wednesday for a bill introduced by a group of Republican lawmakers that would push conversion for community banks back to the same period.

Rep. Blaine Leutkemeyer, R-Mo., among CECL’s fiercest critics in Congress, introduced legislation last week that would prohibit regulators from requiring any financial institution impacted by coronavirus from complying with CECL for six months.

CECL requires lenders to project lifetime credit losses at the time they originate a loan. Under the incurred-loss model, banks didn’t have to record a provision until they saw evidence of deteriorating credit quality.

Some industry observers have expressed concern that CECL will be procyclical, tamping down lending during downturns and periods of crisis, a point Leutkemeyer stressed when he introduced his bill.

“Delaying the implementation of CECL would free up billions of dollars for financial institutions to lend to the small businesses and consumers who have been affected by the spread of the coronavirus and need assistance most right now,” Leutkemeyer said a March 12 press release.

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