[We have added a new item to my website — a letter from four bi-partisan Senators urging Treasury Secretary Munuchin to delay implementation of the accounting convention, Current Expected Credit Losses (CECL), adopted by the Financial Accounting Standards Board (FASB), a self-anointed board without routine oversight or control by government agencies. Secretary Munuchin, as Chairman of the Financial System Oversight Committee, is authorized by the Dodd-Frank legislation to review and challenge any law that might substantially and negatively impact the economy and the financial system.

FDIC Chairman Jelena McWilliams recently expressed her concerns about the negative impact CECL is likely to have on the banking system and the economy. For example, CECL required the 200 largest banks to increase their reserves by 60% during the first quarter of 2020 compared to the first quarter of 2019, representing tens, if not hundreds of billions of capital taken out of the banking system’s capital and reducing lending capacity by eight to ten times the capital reduction — all as we might be moving into a treacherous time in the economy and banking system.]

Dear Secretary Mnuchin: 

As the nation grapples with the Covid-19 pandemic and the resulting unprecedented public health and economic crisis, appropriate planning must be made for the future and that incentives are aligned for the country to rebuild. However, we are concerned that the decision by the Financial Standards Accounting Board (FASB) to implement the new current expected credit loss (CECL) accounting standard on January 1, 2020, for mid-size, regional and national banks, credit unions, and other financial services firms will make it harder for consumers and businesses to access credit. We request that the Financial Stability Oversight Council (FSOC) conduct a study on the new standard’s impact on lending and economic consequences overall. 

Even prior to the current economic downturn, there was an insufficient understanding of the potential economic impacts of the new accounting approach on banks and the customers and communities that they serve. As banks, credit unions, and other financial services firms built new models and operational systems to adopt the CECL standard, concerns grew that it would impact their ability to lend. Worse, those affects would be pro-cyclical during an economic downturn and slow a recovery. During this debate, it was unimaginable that we would face a global pandemic leaving a devastated economy in its wake. Unfortunately, this is where we now find ourselves. 

In March 2020, Federal Deposit Insurance Corporation (FDIC) Chairman Jelena McWilliams wrote to the FASB expressing concern that the COVID-19 pandemic had caused “sudden and significant changes in the economy,” noted the “uncertainty of future economic forecasts,” and contended that the economic crisis made the sophisticated models designed to account on the day a banks books a loan for all future credit losses, as required by CECL, “potentially more speculative and less reliable at this time.”1 

The new standard’s impact can be seen on the dramatic increase on the loan-loss reserve levels of banks of all sizes. The reserves for the 200 largest banks, which have community, state, regional, and national footprints, increased by nearly 60% at the end of the first quarter compared to the quarter ending 2019, representing billions of dollars of capital that has been taken out of the system during a moment when it is most needed.2 

While it is possible to disagree about the wisdom of the timing of the CECL adoption during the pandemic, now is the optimal time to assess CECL’s economic impact, including how the policy affects products and lending decisions of financial institutions, and especially the consequences on customers in low-to-moderate income communities. For that reason, we believe FSOC should begin a comprehensive economic impact study about the economic consequences of the CECL policy over the next four quarters. 

Instead of relying on speculation and models, that look backward as much as forward, the FSOC can gather current macroeconomic data and banking metrics. The FSOC can observe a year’s worth of data and complete a report by July 2021. We look forward to its findings and expect it to better inform the debate around CECL and its impact on lending to consumers and businesses by financial institutions and financial services firms. 


Doug Jones
United States Senator

Thom Tillis
United States Senator 

Jon Tester 
United States Senator

Kevin Cramer
United States Senator 


1 FDIC Chairman McWilliams letter to FASB, “FDIC Chairman Urges FASB to Delay Certain Accounting Rules Amid Pandemic,” March 19, 2020. Available at: https://www.fdic.gov/news/news/press/2020/pr20036.html

2 Morgan Stanley report on 1Q 2020 Bank Earnings Update, April 2020.