A bipartisan group of lawmakers wrote to the Securities and Exchange Commission today expressing concern about the adverse effect of FASB’s current expected credit loss accounting standard on banks and their customers during times of economic stress. Led by Reps. Roger Williams (R-Texas) and Vicente Gonzalez (D-Texas), the lawmakers called for CECL to be delayed until the full economic effects of the standard can be understood.
The lawmakers cited data provided by the American Bankers Association indicating that during a period of economic stress, CECL would cause significant spikes in certain banks’ loan loss reserves. The data was compiled from various banks that collectively hold more than 10% of loans in the industry.
“The composite snapshot assembled by ABA suggests that credit loss allowances may be over five times the amount of today’s incurred loss estimates,” the lawmakers said. “We are concerned that banks may cut product lines and reduce lending, particularly to low- and moderate-income borrowers who are most in need of greater access to capital. This will raise costs of essential products such as the 30-year mortgage and small business loans.”