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FASB extends CECL deadline for most lenders

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Most banks and credit unions are getting a temporary reprieve from a controversial accounting standard for projected loan losses.

The Financial Accounting Standards Board voted on Wednesday to extend the deadline for conversion to the Current Expected Credit Loss methodology to January 2023 for all but the nation’s biggest publicly traded banks.

FASB is also laying plans to consult with banks registered with the Securities and Exchange Commission — those lenders must still comply next January — auditors and regulators in hopes of identifying points of confusion and unnecessary procedures.

Prior to Wednesday’s vote, smaller publicly traded banks that aren’t registered with the SEC were scheduled to convert to CECL on Jan. 22, followed a year later by privately held banks and credit unions.

Adopted in June 2016, CECL has become a contentious topic, with detractors claiming it would divert capital away from lending and lead to longer, deeper recessions. Legislation in the House and Senate, aimed at delaying CECL until a quantitative impact study is conducted, has attracted bipartisan support.

The new standard requires lenders to forecast and reserve for lifetime credit losses as soon as they add loans to their portfolios. Under the current incurred-loss standard, lenders recognize credit losses when default becomes imminent.

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