CBAI responded to disturbing comments by FASB’s Chairman Russell Golden about the role community banks played in the financial crisis and presented an alternate approach to the Current Expected Loss (CECL) model. In his remarks, Golden enumerated “troubling misconceptions” including “The credit crisis involved only large banks.” He cited community bank bank failure statistics followed by his conclusion that “Clearly community banks have been a major part of the problem” and that this is the reason why “all lending institutions should be included in the new guidance.” This flawed reasoning is comparable to citing elder financial abuse statistics and then concluding that senior citizens have been a major part of the problem.
What is not needed in FASB’s response to the financial crisis is a one-size-fits-all CECL model being imposed on community banks. What is needed is an exemption from CECL for banks under $10 billion in assets. An exemption would alleviate the concerns of community banks regarding inappropriate and expensive provisioning that does not fairly present the risk profile of their assets. Read CBAI Letter to Golden.
December 21, 2015