Week ahead: CECL in the spotlight as government reopens

With the government shutdown over, credit union priorities could get a chance to move to the forefront – provided another shutdown doesn’t occur.

President Trump on Friday agreed to a deal that will fund the government for three weeks, giving lawmakers until Feb. 15 to come to an agreement on border security and other issues. If a deal is not reached by then, another shutdown could happen.

Bloomberg News

“With today’s passage of legislation to temporarily reopen the government, many of these families will see their back pay restored, and can return to financial security,” Jim Nussle, president and CEO at Credit Union National Association, wrote in a statement Friday. “We will continue to engage with lawmakers as they work to continue funding the government beyond the February 15^th stopgap date.”

Despite the government reopening, thousands of federal contractors remain in limbo since unlike federal employees, they are not guaranteed to receive back pay for the two missed paychecks that would have been issued had the shutdown not taken place. A report released Monday by the nonpartisan Congressional Budget Office found that the economy took an $11 billion hit, including $3 billion that's gone forever, in the 35 days that parts of the federal government went unfunded.

While the National Credit Union Administration, an independent government agency, remained open amid the shutdown, credit unions did feel some impact as an online portal for members to comment on proposed credit union mergers was inactive during the government closure. As of Monday morning, that site is back online.
With the shutdown in the rear view mirror, the banking world is focusing on today’s public roundtable from the Financial Accounting Standards Board on an updated Current Expected Credit Loss rule.

Beginning in the first quarter of 2022, credit unions will be mandated to incorporate credit loss estimated through the CECL method within their call reports -- but many have recommended institutions begin implementing the model earlier to price in unforeseen risk on capital.

Credit union trades continue to speak out on CECL.

“CECL continues to be one of the most discussed topics within NAFCU’s CFO network as it only adds to credit unions’ ever mounting regulatory stresses," said Curt Long, chief economist at the National Association of Federally-Insured Credit Unions. “The fact is credit unions should never have been included within the scope of the CECL standard because they were not part of the poor lending practices that precipitated the financial crisis.”

For its part, the Credit Union National Association has raised concerns around CECL’s effect on credit unions’ financial position and the potential adverse impact that would come from increasing the compliance burden.