During a House Financial Services subcommittee hearing today, lawmakers on both sides of the aisle expressed serious concerns about the economic effects of the Financial Accounting Standards Board’s current expected credit loss standard on the cost and availability of credit for consumers. Lawmakers echoed many concerns raised by the American Bankers Association in its statement for the record, including that CECL could increase the volatility of bank regulatory capital and constrain lending in an economic downturn.
“Switching to CECL . . . will have significant real-world impacts on community banks, minority banks and other providers of credit and banking services,” said Rep. Gregory Meeks (D-N.Y.), warning that if banks curb lending as a result of CECL, it could create a ripple effect that could disproportionately affect low- to moderate-income borrowers. Rep. Vicente Gonzalez (D-Texas), who last year co-sponsored an ABA-supported bill calling for an economic impact study of CECL, added that “the CECL standard leaves many questions unanswered, even for those who have already implemented it.”
FASB Chairman Russell Golden told lawmakers that his organization will closely monitor information from institutions already implementing the standard—as well as findings from a forthcoming Treasury study on CECL’s effect on regulatory capital—to understand if changes are needed to the standard ahead of the 2023 implementation deadline for smaller institutions. He added that “we’re always open to improving our standards . . . there will be a lot of information about the CECL rollout from the larger public companies that we can all review and study.”