CECL Update - CBAI Member Attends FASB Meeting

A Strong Congressional Response, and CBAI Staff Lobbies Issue in Washington

CBAI member Greg Ohlendorf, President and CEO of First Community Bank and Trust in Beecher, Illinois, was one of four ICBA bankers who attended the February 4, 2016 meeting with the Financial Accounting Standards Board (FASB) to discuss community banks’ serious concerns with FASB’s proposed Current Expected Credit Loss (CECL) model. Backing the community bank position was a U.S. House of Representatives’ letter to FASB (January 29, 2016) signed by 62 bi-partisan members.

This meeting was hastily convened by FASB after Chairman Russell Golden’s unbelievable comments about community banks and the financial crisis. CBAI stated in its December 21st response to Golden, “In the span of four sentences you cite community bank failure statistics followed by your conclusion that ‘Clearly community banks have been a major part of the problem [financial crisis]’ and that this is the reason why ‘all lending institutions should be included in the new [CECL] guidance.’ This flawed reasoning is comparable to citing elder financial abuse statistics and then blaming senior citizens for that abuse. Read CBAI’s Comment Letter to FASB.

The congressional letter to FASB stated in part, “FASB must proceed with utmost caution … as [CECL] has the potential to irreversibly damage community banks”. Members of Congress also noted that a “method for determining expected losses should be simple, straightforward, and easy to apply. A requirement that uses complex, theoretical forecasting models, determining each loan’s probability of failure based on a wide range of economic factors, is impractical, costly, and time consuming for community banks.” Read U.S. House Member Letter to FASB.

CBAI thanks Illinois Congressmen Mike Bost (R-12), Rodney Davis (R-13), Bill Foster (D-11), Randy Hultgren (R-14), and Mike Quigley (D-05) for signing the Member Letter urging caution, suggesting better alternatives, and requesting a response to their thoughtful questions and concerns.

CBAI’s Vice President Federal Governmental Relations, David Schroeder, supported the efforts of Ohlendorf and U.S. House members during his quarterly visit to Washington last week. He cited the harmful effects of the CECL model with the entire Illinois congressional delegation. Schroeder noted that the Illinois delegation is quickly gaining knowledge about this important issue and wants to be kept informed on progress in resolving the widely divergent positions between community banks and FASB. Read Report on CBAI Quarterly Staff Visit to D.C.

February 15, 2016