CUNA Issues Nine Questions to Assess Credit Unions’ CECL Readiness

Questions cover accounting standards, implementation plans, data for ALLL methodologies, and more.

5/28/2019Rules and Regulations Stamps

Regulators have released updates to the Current Expected Credit Loss FAQs. Your Association has previously reported on this. Included in the resources of the CECL FAQs is the Conference of State Bank Supervisors’ CECL Readiness Tool. The readiness tool provides a framework that credit unions can use to plan for the implementation of CECL.

In addition, the National Credit Union Administration released an AIRES examination questionnaire on CECL preparedness, which is available in Microsoft Excel. The CECL preparedness tab has been added to the AIRES Exam Questionnaires.

Credit unions can also access the archived version of the NCUA’s April 11 CECL webinar here.

The Credit Union National Association mentioned that as an alternative to the CECL AIRES questionnaire, there are nine questions currently being used to assess a credit union’s readiness:

  1. Has management reviewed or otherwise familiarized itself with the revised accounting standard, Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (CECL)?
  • Yes, management has reviewed or otherwise familiarized itself with the standard.
  • No, management has not yet begun to review or otherwise familiarize itself with the standard.
  • In process, management has begun, but has not yet completed, familiarizing itself with the standard.
  1. Has management reviewed or otherwise familiarized itself with the Joint Statement on the New Accounting Standard (ASU) on Financial Instruments – Credit Losses June 17, 2016, and the interagency frequently asked questions and answers (FAQs) on the new credit losses accounting standard?
  • Yes, management has reviewed or otherwise familiarized itself with the joint statement and FAQs.
  • No, management has not yet begun to review or otherwise familiarize itself with the joint statement and FAQs.
  • In process, management has begun, but has not yet completed, familiarizing itself with the joint statement and FAQs
  1. Has management established an implementation plan and/or timeline?
  • Yes, management has established an implementation plan and/or timeline (scan/upload document into exam directory).
  • No, management has not yet begun to establish an implementation plan and/or timeline.
  • In process, management has begun establishing, but has not yet completed, an implementation plan and/or timeline (document implementation progress in scope and upload any documents into exam directory).
  1. Has management discussed CECL implementation with the auditor of the credit union’s financial statements?
  • Yes, management has begun discussing its implementation progress with the external auditor who audits its financial statements.
  • No, the institution does not have an external auditor who audits its financial statements.
  • In process, the institution has an external auditor who audits its financial statements, but management has not yet begun to discuss its implementation progress with the external auditor.
  1. Has management identified which functional department areas within the credit union will be involved with implementing the new standard and established a cross-functional implementation committee?
  • Yes, management has identified which functional areas will be involved with implementation and has established a cross-functional implementation committee.
  • No, management has not yet begun to consider which functional areas will be involved in the process
  • No, management has identified which functional areas will be involved in the process and has considered formation of a cross-functional implementation committee, but determined that a cross-functional implementation committee is not necessary.
  • In process, management has identified which functional areas will be involved in the process, but has not yet considered formation of a cross-functional implementation committee.
  • In process, management has identified which functional areas will be involved in the process and plans to establish a cross-functional implementation committee, but has not yet completed the formation of the committee.
  1. Has management begun retaining data used in its current Allowance for Loan and Lease Losses methodology(ies), including any related data stored by third-party service providers?
  • Yes, management has begun retaining data and has instructed any third-party service providers not to permanently purge related data fields.
  • No, management has not yet begun retaining data and has not instructed any third-party service providers not to permanently purge related data fields.
  • In process, management has begun, but has not yet completed, steps to ensure that data used in its current ALLL methodology(ies) are retained and that any third-party service providers do not permanently purge related data field
  1. Does management plan to engage a third-party vendor solution to perform their CECL estimate?
  • Yes, management has begun reviewing and interviewing third-party service providers.
  • No, management will not engage a third-party vendor solution.
  • In process, management is evaluating whether to engage a third-party service provider, but has not yet decided whether or not to pursue this option.
  1. Has management determined the impact of CECL on capital?
  • Yes, management has determined the impact of CECL to their allowance. (Include estimated impact, expressed as a percentage increase or decrease of current allowance in the comments. In addition, please assess the reasonableness of the estimate.)
  • No, management hasn’t determined impact.
  • In process, management has started the process of determining an impact, but has not completed its analysis.
  1. Summarize management’s comments if the choices above do not adequately capture management’s comments or if additional or clarifying information is necessary to adequately reflect management’s progress.


Question of the Week

Q: If the credit union opens an estate account, do we qualify the executor/personal representative or deceased member for eligibility?

A: In Oregon, state-chartered credit unions establishing an estate account require that the deceased was a credit union member or was otherwise eligible for membership.

In Washington, state-chartered credit unions can open the account if either the executor or the deceased person is in your field of membership. Your credit union should rely on the executor’s statement to determine the proper taxpayer identification number, or TIN, for the account. Usually, this is either the decedent’s Social Security number or a separate TIN assigned to the estate. The account should not be recorded under the executor’s SSN because the funds do not belong to him or her.

Idaho law is silent on the issue.

Federally chartered credit unions need either the deceased to have been a member of the credit union prior to death, or all beneficiaries of the estate account as members.

Legal Briefs

National Credit Union Administration (NCUA)

NCUA announced that it will pay Share Insurance Fund dividends the week of May 20.

NCUA published the results of the May 23  board meeting.

NCUA proposed raising the threshold of nonmember and public unit shares up to 50 percent of paid-in and unimpaired capital and surplus from the current threshold of 20 percent.

Consumer Financial Protection Bureau (CFPB)

CFPB announced the publishing of their Spring 2019 rulemaking agenda.

CFPB released a financial education tool for Active-Duty Service members.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of May 23. The last update prior to this was May 17.