Letter to Credit Unions (22-CU-10)
Simplified CECL Tool for Credit Unions
Dear
Boards of Directors and Chief Executive Officers:
The
National Credit Union Administration is providing a tool to assist small credit
unions with determining their allowance for credit losses (ACL) on loans and
leases as required under Accounting Standards Codification Topic 326, Financial
Instruments – Credit Losses, commonly referred to as Current
Expected Credit Loss (CECL). The Simplified CECL Tool (CECL Tool) is designed
for credit unions with less than $100 million in assets. The CECL Tool and its
supporting documentation are available on the CECL Resources page at NCUA.gov.
The
CECL Tool is one of many options available to calculate the ACL for loans and
leases under the requirements of the CECL accounting standard. While credit
unions may choose from a variety of credit loss models under CECL (for example,
expected loss, discounted cash flow, roll-rate, probability of default), the
CECL Tool uses the Weighted Average Remaining Maturity (WARM) methodology.
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