MBA Coronavirus Resource Center Update
FDIC Chair Calls for FASB to Delay CECL Rule Amid Pandemic
Federal Deposit Insurance Corp. Chair Jelena McWilliams, in a Mar. 19 letter to the Financial Accounting Standards Board, urged FASB to delay or postpone implementation of its current expected credit losses accounting rules.
The letter (https://www.fdic.gov/news/news/press/2020/pr20036a.pdf?source=govdelivery&utm_medium=email&utm_source=govdelivery) asks FASB to permit financial institutions currently subject to the CECL methodology an option to postpone implementation of CECL given the current economic environment. It also asks FASB to impose a moratorium on the effective date for those institutions that are not currently required to implement CECL “to allow these financial institutions to focus on immediate business challenges relating to the impacts of the current pandemic and its effect on the financial system.”
The CECL, which becomes effective this year for Securities and Exchange Commission registrants and for all other companies in 2021, changes accounting standard expected loss methodology and requires institutions to calculate and recognize the lifetime expected loss of a loan at origination. In contrast to the traditional U.S. Generally Accepted Accounting Principles (GAAP) approach, which required companies to establish a reserve when a loan loss is probable and reasonably estimable, CECL requires day-one upfront recognition of credit losses using long-term economic forecasts over the contractual life of the loan but does not allow a similar upfront recognition of corresponding future revenues associated with the loan.
The Mortgage Bankers Association and other industry trade groups have expressed concerns about the nature of the new CECL rules and the speed in which FASB has sought to implement them. MBA has long-recommended that CECL implementation be delayed pending a quantitative impact analysis to assess the macroeconomic and public policy implications, and to allow for the consideration of potential alternatives and post-issuance field testing.
McWilliams also called for transitions to and exclusions from certain other accounting rules, including excluding COVID-19-related modifications from being considered a concession when determining a troubled debt restructuring classification.
MBA Staff Working Remotely
MBA offices at 1919 M Street NW in Washington, D.C. are closed out of abundance of concern regarding the coronavirus pandemic, MBA employees are working remotely and have full access to MBA resources to conduct their jobs and assist MBA members with everyday tasks.
About the MBA Coronavirus Resource Center
The MBA Coronavirus Resource Center has been updated and can be accessed at https://www.mba.org/news-research-and-resources/mba-coronavirus-(covid-19)-updates/mba-coronavirus-(covid-19)-resources.
This Resource Center includes information from health/disease control agencies, recommended business continuity plans, relevant information from financial regulatory agencies, as well as guidance on how companies should communicate with employees, their customers and the public.
MBA recommends members carefully review the updated Interagency Statement on Pandemic Planning issued by the FFIEC agencies in 2007 in response to the outbreak of the avian flu. While this document was developed with banks in mind, MBA believes that it can also be used as a guide for nonbank financial institutions in setting their own policies and procedures.
The Department of Health and Human Services and the Centers for Disease Control and Prevention (CDC) have developed a Business Pandemic Influenza Planning Checklist that identifies important, specific activities businesses can do now to prepare in the event of an outbreak.
MBA encourages its members to work with community planners to integrate their pandemic plans into local and state planning, particularly because the industry’s operations and services are deemed to be an essential part of the nation’s critical infrastructure or key resource.
