ABA and Trade Groups Lobby for Rule Changes, Delays

The American Bankers Association (ABA) is lobbying regulators and politicians to help the banking sector respond to the COVID-19 coronavirus pandemic.

In collaboration with other financial trade groups, the ABA has called for the Securities and Exchange Commission (SEC) to delay the implementation of the Current Expected Credit Loss (CECL) approach.

CECL was introduced following the 2007-08 financial crisis to improve the accounting system for loans to take into account forecasts for the life of loan contracts rather than just the next financial year or period.

In a letter to SEC chairman Jay Clayton, the ABA – along with American Financial Services Association, the Consumer Bankers Association, the CRE Finance Council, the Mid-Size Bank Coalition of America and the Mortgage Bankers Association – said other measures taken to improve bank liquidity and capital positions had already strengthened balance sheets.

The associations warned that the CECL rules could “take capital out of the system during a moment when it is most needed”.

“A long-term delay of CECL will allow us to deploy that capital today in support of our customers and the economy,” the letter stated.

The Financial Accounting Standard Board (FASB) has been designated as the standard setter for the CECL by the SEC. However, the associations said the SEC had a “plenary authority” to overturn or delay the new rules.

FDIC chair Jelena McWilliams last week also called for the FASB to pause the implementation of CECL.

Separately, the ABA and other trade organizations urged lawmakers to introduce provisions to “enhance and incentivize” the US Small Business Administration’s 7(a) loan program in its final bill.

“As in past periods of economic crisis, banks and credit unions turn to the 7(a) loan program as one of the most valuable tools to continue serving small business borrowers,” the organizations said.

The joint letter called for changes to the program’s final wording including fee waivers for small business borrowers and lenders, increased federal support, increased deferment flexibility and an increased maximum loan size for all 7(a) and Express loans.

In addition, the ABA and the Independent Community Bankers of America have written to the leaders of the House and Senate Agricultural Committees calling for changes Farm Service Agency loan programs, designed to address the short- and long-term effects of the COVID-19 pandemic.

Guaranteed loan limits should be increased to $2.5 million, the organizations said, as well as increases to guaranteed loan programs and cuts or suspensions to origination fees.

They also called for the US Department of Agriculture to streamline the process for loan approvals and temporarily suspend environmental assessment requirements.

The ABA also requested that the Department of Agriculture approve the Enhancing Credit Opportunities in Rural America Act. The association has supported the bill, which will remove tax on interest earned from agricultural real estate loans.