McWatters concerned about CECL implementation
WASHINGTON – J. Mark McWatters, chairman of the National Credit Union Administration, has concerns about the current expected credit losses standard, but told credit unions to be prepared for its implementation.
McWatters and NCUA board member Rick Metsger discussed some of their regulatory priorities during a panel at the Credit Union National Association’s Governmental Affairs Conference on Tuesday. The panel was moderated by CUNA President Jim Nussle.
“I’m concerned [about the] implementation of CECL,” McWatters said. “Some have advocated that CECL should be extended, some withdrawn, and other people have said that credit unions and community banks should have an exemption. I think we need to prepare for it.”
Following the 2008 financial crisis, the new CECL standard was developed as a way for financial institutions to better reserve against potential losses on loans but it has proven to be controversial. It goes into effect for credit unions in 2022.
McWatters also advocated for a statutory change to give greater authority to the NCUA regarding field of membership. The chairman specifically called on Congress to change the Federal Credit Union Act to allow all types of credit unions to add underserved areas to their fields of membership.
“There’s no reason to have a statutory prohibition” that tells a credit union “this group is underserved, but you can’t serve it” because of field of membership constraints, McWatters said.
Metsger agreed with McWatters and added that the industry should ask Congress to expand field of membership opportunities.
“You are the defenders of over 100 million people who rely on you to give you that sound, financial footing," Metsger said. “In that context, we seek to do regulation that makes that system safe and sound.”
McWatters, a Republican, and Metsger, a Democrat, also emphasized the importance of compromise when Nussle asked how the two have managed to work with one another despite these partisan differences. A third seat on the board has gone unfilled since Debbie Matz left in April 2016.
Last month the Senate Banking Committee approved the nominations of Todd Harper and Rodney Hood to the board. Both still need to be confirmed by the full Senate. Harper’s term would run until August 2021 while Hood’s would end in August 2023.
McWatters, whose term is set to expire in August, concluded the session by offering some advice to credit unions.
“Keep it simple,” McWatters said. “When things turn bad, it’s the simple stuff that matters: Capital and liquidity.”