Congress shouldn’t allow banks to opt out of new credit loss accounting rules, the parent group of the U.S. accounting rulemaker told House and Senate leadership. Senate coronavirus relief legislation allowing the optout “fundamentally undermines” long-standing independent standard-setting, the group said.
Financial Accounting Foundation Chair Kathleen Casey asked the lawmakers to remove a provision from the Senate package that would let banks delay compliance with the current expected credit losses (CECL) accounting standard. Lawmakers continue to negotiate what will ultimately end up in the package, and House Democrats have offered their own version.
- Squashing the post-financial crisis accounting rule doesn’t address concerns about the effect the rule has on banks and their regulatory capital, said Casey, a former SEC commissioner.
- “This concern can be addressed directly by the regulators themselves without requiring any change to CECL or its effective dates,” Casey wrote in the late-Monday letter. “Further, the banking regulators have signaled that they are actively working to address these concerns.”
- The FAF is the parent group of the Financial Accounting Standards Board. FASB has been under intense pressure to delay, modify, or drop the new accounting rule as the coronavirus pandemic spreads and banks struggle to determine how to tally expected losses on their loans.