Luetkemeyer, McHenry Query SEC on CECL Effects

Senior House Financial Services Committee member Blaine Luetkemeyer (R-Mo.) and Ranking Member Patrick McHenry (R-N.C.) today wrote to Securities and Exchange Commission Chairman Jay Clayton expressing concerns about the coming CECL loan loss accounting approach and its effects on markets and investors.

CECL, which refers to the current expected credit loss model for loan loss accounting developed by the Financial Accounting Standards Board, is considered the biggest change ever in bank accounting. Luetkemeyer and McHenry wrote that they are worried CECL implementation—which begins in 2020 for publicly traded banks—could have unanticipated effects on the financial and housing industries with questionable benefit.

The lawmakers asked Clayton whether the SEC has solicited or received feedback on CECL’s effectiveness, whether privately and closely held banks will benefit from CECL, what effects CECL may have on housing GSEs Fannie Mae and Freddie Mac and whether the SEC would welcome a quantitative study of CECL before implementation—as the American Bankers Association has urged.