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What does the latest CECL delay mean for your credit union?

By Aaron Rouse, VP, Chief Financial Officer, Accolade

Back in the headlines

In June of 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which impacts the estimation and disclosure of future losses on financial instruments. As you may recall, this new rule replaces the current incurred-loss model of estimating credit losses with the expected credit loss model (CECL) and has been the subject of much scrutiny and debate. CECL is in the headlines again due to a proposed delay in the effective date.

After already pushing the effective date back to fiscal years beginning after December 15, 2020, for nonpublic business entities, FASB has all but passed a proposal to push this date even farther. Once the formal vote has passed, the new effective date will be fiscal years beginning after December 15, 2022.

What does this mean for my credit union?

If your credit union is like most, you are either hoping CECL goes away or that FASB would rip off the band-aid and stop delaying. Elimination of the rule seems unlikely with public business entities implementing next year. Although this delay provides more time to prepare and learn from those that will implement in 2020, credit unions should still be preparing for CECL. This could mean forming a CECL team to research what method to use, what data is available, if software will be purchased, and what business partners are out there. Collaboration between departments is key to being fully prepared for the new rules.

While CECL is beneficial and will ultimately strengthen credit unions overall, the new rules transform credit-risk management from a reactive, reduce-loan-loss impact approach to a more proactive, preventative approach. The time is now to make sure your credit union is ready when the new rules begin to take effect.

How is Corporate One helping to meet this need?

Through its CUSO, Accolade Investment Advisory, Corporate One has two turn-key CECL solutions. Both solutions are built on a robust set of market and industry data to reduce the amount of data you prepare, and there is no software to learn or maintain; Accolade does all the work. Further, our models are loan level with detailed reporting. For more information, or to request a demo of our solutions, you are welcome to contact me using the button below.

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