Menu
As a direct result of the Association’s advocacy efforts, Utah state-chartered credit unions with assets of less than $10 million are no longer required to follow the Current Expected Credit Loss (CECL) methodology for calculating appropriate loan loss reserves.
The change comes as the Utah Department of Financial Institutions (UDFI) has modified the rule affecting credit unions, R337-5-3, Allowance for Loan and Lease Losses.
Said Scott Simpson, president/CEO of the Utah Credit Union Association: “Our thanks to Utah DFI team members, who were receptive to the idea of exempting some credit unions from CECL. The department has been helpful in easing their regulatory burden.”
Prior to the adopting of the new rule, all Utah-state-chartered credit unions were required to follow CECL. The change provides parity with similar federally chartered credit unions, who have not had to follow CECL since the new accounting principle went into effect in early 2023.
“CECL has never made sense for many credit unions,” said Stephen Nelson, EVP, credit union support at the Utah Credit Union Association. “Those credit unions just don’t have the scale or complexity to make CECL useful. It requires more work to arrive at the same numbers produced with prior methods. We’re grateful to the UDFI for the rule change; more credit unions should be exempted from CECL.”
The Association has advocated with the NCUA, FASB, and the UDFI to exempt as many credit unions as possible from the accounting rule.
Utah state-chartered credit unions with assets under $10 million will now use the following methodology for determining an appropriate allowance for loan and lease losses (ALLL):
The rule also requires that the above method be used at least annually to determine the ALLL. Whenever the ALLL account is materially different than the amount required by the calculation, the credit union must make an immediate adjustment by debiting or crediting the Provision for Loans Losses expense account.
