MBA, Trade Groups Ask Agencies to Delay CECL Accounting Standard

The Mortgage Bankers Association and nearly a dozen industry trade groups asked federal agencies to delay the January 2020 implementation of controversial accounting standard, saying more analysis of potential consequences to lenders and consumers is needed.

The March 5 letter to the Securities and Exchange Commission and the Financial Accounting Standards Board said the current expected credit loss (CECL) standard, set to take effect for certain institutions beginning January 2020, continues to raise economic and compliance concerns for companies and should be delayed pending additional analysis.

“As the implementation phase of CECL has begun, we feel it is important to maintain the process that FASB has exercised so far by analyzing the standard and ensuring there are no unintended consequences, taking into account both operational considerations and assessing the availability of decision-useful information for all sizes and types of institutions,” the letter said. “In addition to economic concerns, there still are compliance concerns for companies.”

The letter noted according to a survey by KPMG, while progress has been made, companies are still struggling to make certain accounting, modeling and data decisions.

“We believe it is important to delay implementation of CECL in order to allow for time to conduct a quantitative impact analysis and to consider potential alternatives, while allowing for post-issuance field testing,” the letter said. “Time for further assessment will also allow regulators to better understand and address the key consequences of any proposal for capital and other regulatory purposes.”

While acknowledging CECL is a “well-intended effort” to provide investors with better information, certain of the trade groups’ members–both preparers and users of such information–have expressed concerns that the standard will have a negative impact on long-term lending, be “procyclical” and disincentivize lending particularly during economic downturns, and will exacerbate many of the hurdles to extending credit that institutions are already facing in the wake of increased capital requirements.

“We appreciate the view by FASB to ensure that the standard will not change the economics of lending; however, we have seen practical examples that CECL, in requiring estimates that forecast future economic trends, would in fact have a negative and real impact on lending nationwide,” the letter said.

Joining MBA in the letter: The U.S. Chamber of Commerce, American Bankers Association, Bank Policy Institute, Real Estate Roundtable, Commercial Real Estate Finance Council, National Association of Realtors, Credit Union National Association and National Association of Federally Insured Credit Unions.