Independent Community Bankers of America® (ICBA) leadership said that recent public statements from Financial Accounting Standards Board (FASB) Chairman Russell Golden reflect a lack of understanding and disregard for community banks and a selective historical view of the Wall Street financial crisis. In a letter to Golden, the ICBA Executive Committee also criticized him for denying the excessive cost and complexity inherent in FASB’s Current Expected Credit Loss (CECL) model.
“To say that community banks were a ‘major part of the problem’ is a direct slander on hardworking Americans who devote their professional and, in many cases, personal energies to providing for their communities in both good times and bad,” wrote ICBA Chairman Jack Hartings, president and CEO of The Peoples Bank Co. in Coldwater, Ohio. “FASB’s continued inability to comprehend the community bank business model has resulted in flawed accounting that will harm all aspects of bank lending in this country, costing thousands of jobs and financing options that keep small communities thriving.”
ICBA noted that the financial collapse in fact originated on Wall Street and that community banks fared well due to the relationship banking model that FASB’s proposed revamp to accounting standards directly contradicts. FASB’s CECL model, which forces community banks to record a provision for credit losses the moment they make a loan and essentially mandates the use of complex and expensive credit modeling systems, would have a dramatic negative impact on local communities. Despite Golden’s denials that the updated accounting standards would require complex modeling software and strict regulatory oversight, regulators have already launched webinars on the plan and have predicted a resulting 30 to 50 percent hike in loan-loss reserves.
“Clearly there is a disconnect between FASB and the regulatory agencies that must be addressed before the standard is finalized,” Hartings wrote. “ICBA has repeatedly advocated common sense alternatives for community banks that achieve FASB’s objectives of moving credit losses forward in the credit cycle but avoid day one losses and the complex modeling needed to simulate a crystal ball.”
ICBA continues to advocate its alternative plan for institutions with less than $10 billion in assets, which bases loan-loss provisions on historical losses for similar assets. Meanwhile, ICBA and the nation’s community bankers continue urging FASB to reassess its proposal, which would inflict permanent damage on the economy and forever change the landscape of community bank lending to the detriment of Main Street communities.
The Independent Community Bankers of America®, the nation’s voice for more than 6,000 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services.