June 24, 2016
The Honorable Richard Metsger
Chairman
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314
Dear Chairman Metsger:
On behalf of America’s credit unions, I am writing regarding Accounting Standards Update No.
2016-13, Financial Instruments–Credit Losses, recently issued by the Financial Accounting
Standards Board (FASB). The Credit Union National Association (CUNA) represents America’s
credit unions and their more than 100 million members.
Specifically, I am writing to seek NCUA’s assurance that it will make assisting credit unions
with implementation of the new accounting standard a top priority. As NCUA is aware, the
standard will have a direct—and in some instances dramatic—effect on all credit unions.
We appreciate NCUA’s coordination with FASB over the past several years as it has worked to
finalize the standard, including NCUA’s participation on various FASB roundtables. In addition,
we were glad to see the timely release of the June 17 statement issued jointly by NCUA and its
fellow federal financial regulators regarding the new standard. We are particularly encouraged
by remarks in the statement clearly describing that institutions will be permitted to “apply
judgment in developing estimation methods that are appropriate and practical for their
circumstances.” And that, “smaller and less complex institutions will be able to adjust their
existing allowance methods to meet the requirements of the new accounting standard without
the use of costly and complex models.”
While the statement indicates that the agencies will be developing implementation guidance, we
ask NCUA to detail its plans for developing guidance specific to credit unions. The statement
notes that the agencies will be “especially mindful of the needs of smaller and less complex
institutions when developing supervisory guidance describing the expectations for an
appropriate and comprehensive implementation of this standard.” We look forward to NCUA
guidance that is wholly consistent with this remark.
In addition to information about its forthcoming guidance, we ask NCUA to develop a public
framework of how it will assist credit unions as they begin to prepare for implementation of the
new standard. This framework should include a timeline of when the agency will release detailed
compliance resources, such as credit union-specific examples and Q&As. Further, we urge the
agency to establish an implementation task force, comprised of accounting experts from credit
unions of all asset sizes from across the country. This task force will be crucial in ensuring
NCUA has a comprehensive understanding of the ongoing issues credit unions are dealing with
as they prepare to comply. CUNA offers its assistance in recommending expert credit union
representatives to participate on the task force.
Finally, I would like to reiterate concerns described in a June 30, 2015 letter I sent to former
Chairman Debbie Matz. We continue to believe that, while the proposal will in no way change
today’s economic reality, it will result in lower apparent capital ratios at credit unions and banks.
Therefore, we urge NCUA to work with its Office of Examination and Insurance to instruct
examiners to make the appropriate adjustments in assessments of capital adequacy in order to
minimize the negative impact on credit unions. To illustrate this, assume under the new
accounting requirements a credit union’s net worth ratio falls by 50 basis points. In such an
instance, an examiner who otherwise might have suggested, for example, a 9 percent net worth
ratio should now be satisfied with 8.5 percent.
Thank you for considering our concerns. We welcome the opportunity to talk with you regarding
our issues relating to FASB’s new accounting standard. In the meantime, please do not hesitate
to contact me if you have any questions.
Sincerely,
Jim Nussle
President and CEO
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