Bipartisan Congressional Letter Supports ICBA Case Against FASB Accounting Reforms
Washington, DC (PRWEB) February 03, 2016 -- Ahead of this Thursday’s Independent Community Bankers of America® (ICBA) meeting with the Financial Accounting Standards Board (FASB), a bipartisan group of 62 members of Congress, led by Reps. Scott Tipton (R-Colo.) and Patrick Murphy (D-Fla.), expressed strong concerns with FASB’s proposed accounting standards update. In a letter to FASB following robust ICBA advocacy, members of Congress said the Current Expected Credit Loss (CECL) proposal could irreversibly damage community banks’ and credit unions’ ability to continue serving their customers.
“ICBA strongly agrees that FASB’s complex proposal would radically change community bank accounting methods, sharply increasing the cost of lending and constricting the flow of credit,” ICBA President and CEO Camden R. Fine said today. “FASB has repeatedly shown that it does not understand the community bank business model, and its dangerous accounting reforms would harm community bank lending and cost thousands of jobs in communities nationwide.”
FASB’s Feb. 4 roundtable follows an ICBA request for a meeting between community bankers and the full FASB board on the CECL model, which would force community banks to record a provision for credit losses the moment they make a loan. Regulators have said the plan would cause a projected 30 to 50 percent hike in loan-loss reserves, which would dramatically harm consumers and local economies.
ICBA, which has worked to address problems with FASB’s CECL proposal since it was introduced in 2011, called for the meeting after FASB Chairman Russell G. Golden erroneously implicated Main Street community banks in the Wall Street financial crisis. ICBA has long advocated an alternative accounting plan that bases loan-loss provisions on historical losses, and it is calling on FASB to pause the standard-setting process until community bank concerns have been fully explored and remedied.
Today’s bipartisan congressional letter echoes ICBA’s concerns and calls on FASB to weigh the impact of its plan on lower-income borrowers and small businesses, to consider practical alternatives to its complex proposal, and to consider tiered implementation based on the size and risk profile of affected institutions.
ICBA’s alternative—basing loan-loss provisions on historical losses for similar assets—addresses the problems that FASB is attempting to solve as well as the flaws that dog its CECL plan. Under this alternative, which also has the support of the nation’s credit unions represented by the Credit Union National Association and National Association of Federal Credit Union, community financial institutions would still build allowances for potential losses and recognize their reserves sooner in the credit cycle without relying on costly and complex modeling systems that would disrupt their localized business model.
About ICBA
The Independent Community Bankers of America®, the nation’s voice for more than 6,000 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services. For more information, visit http://www.icba.org.
Aleis Stokes, Independent Community Bankers of America, +1 (202) 821-4457, [email protected]
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