Lawmakers recently introduced legislation to delay implementation of a new accounting standard for current expected loan losses. But policymakers should seek to preserve the accounting body’s independence.
Readers weigh in on the role of the Financial Accounting Standards Board, consider personnel changes at the Consumer Financial Protection Bureau, debate the viability of public banks and more.
Banking officials can reasonably disagree on new standards for current expected credit losses, but the accounting body developed the rules over many years and based them on extensive feedback.
The standards board has been granted vast authority without having to answer to policymakers, and its latest accounting method, CECL, will be a disaster for small banks.
Despite recent chatter about a delay, there’s reason to believe the Current Expected Credit Losses accounting standard will go into effect next year. Regulators should do more to help smaller institutions prepare.
The SEC and FASB control the process now, but Congress should give banking regulators a more central role in overseeing the creation of accounting rules.
Many community banks lack the historical loss data they need to adopt the new accounting standard, which raises questions about the model’s efficacy for these institutions.
