Re: Mandated Study of the CECL Accounting Standard
Jonathan Greenstein
Deputy Assistant Secretary, Financial Institutions Policy
U.S. Department of Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Mr. Greenstein:
The American Bankers Association (ABA) thanks Congress, the Federal banking agencies and the Treasury department for their work throughout this unprecedented national health crisis to address the various issues that impede banks’ efforts to serve borrowers. We believe that the potential economic impacts of COVID-19 are significant and the vast efforts to address them are worthwhile. With that in mind, however, the Consolidated Appropriations Act for Fiscal Year 2020 that was signed into law by President Trump on December 20, 2019 directs federal financial regulators to conduct a study on the need, if any, for changes to regulatory capital requirements necessitated by the CECL accounting standard to be submitted within 270 days. Recognizing that Federal banking regulators have provided an option for a portion of CECL credit loss allowances to be temporarily deferred from regulatory capital requirements, we believe that a diligent CECL Study will demonstrate the need to make such provisions permanent, as well as to fully reflect differences in CECL credit loss estimates that would be made throughout a credit cycle compared to incurred loss estimates.
The purpose of this letter, therefore, is to emphasize the key issues that the CECL Study must address. Additionally, given the significant and costly changes that CECL requires to capital management and bank operations, we believe that all FSOC members should join FDIC Chairman Jelena McWilliams and NCUA Chairman Rodney Hood in requesting FASB to suspend the effective date for banks that are currently scheduled to implement CECL in 2023. Further, consistent with these concerns, we also recommend that you support congressional efforts to extend the CECL relief in the CARES Act until at least 2023.
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