Informed experts know that the mark-to-market accounting rules issued by the Financial Accounting Standards Board (FASB) in the last decade led directly to the unnecessary charge off of $500 billion of bank capital in the US. This, in turn, led to an economic collapse, massive taxpayer infusions of capital into banks and other financial institutions, and a very serious recession that we are just finally shaking off.
FASB is at it again, requiring substantial changes to loan loss reserving by banks that will likely result in a repeat of FASB’s last fiasco, hitting particularly hard community banks and the small cities and towns they serve. Those of you who know me and my lifetime commitment to a strong and resilient banking industry serving our nation’s economic needs, know that I have never and would never advocate any policies that would diminish the industry’s strength and resiliency.
FASB is a private organization set up by the accounting industry to impose accounting standards on companies throughout the nation, including financial organizations. FASB’s rules have the force of law despite the fact that FASB is not subject to any public or government oversight.
Community bankers – already suffering more than enough – will be hit particularly hard by FASB’s latest proposed rules. FASB’s latest proposal must be stopped in its tracks. Bills are pending in Congress force FASB to withdraw its proposal to allow an economic impact study to be done. I hope you will write to your members of Congress and urge them to pass legislation to bring FASB under reasonable public oversight.
The statement below from Rob Nichols, the President of the American Bankers Association, says it very well. I urge you to read the statement and lend your support.
Best regards, Bill Isaac
ABA Statement on FASB Vote to Delay CECL
By Rob Nichols, ABA president and CEO
“FASB’s vote to delay CECL for certain smaller banks offers further proof that the required efforts to implement this costly standard are far greater than the board has previously led bankers to believe. A partial delay without a requirement for study or reconsideration simply kicks the can down the road – it does not reduce the ongoing data, modeling and auditing requirements facing smaller banks or address the increased pro-cyclicality it will cause. The delay should apply to banks of all sizes, and should be used to conduct a rigorous quantitative impact study to properly assess the effect this new standard will have on their ability to serve their customers and the broader economy, particularly during an economic downturn. We encourage Congress to act quickly to ensure this flawed standard is delayed for all institutions until such a comprehensive analysis can be completed.”