Washington Updates

House passed a bill backed by bank and credit union trade groups and a bipartisan group of House members called on the Office of Financial Research (OFR) study the potential impact of the current expected credit loss (CECL) accounting model.

The House on October 22 voted 249-173 to pass the Corporate Transparency Act (H.R. 2513). The bill is supported by both bank and credit union trade groups. The legislation, sponsored by Rep. Carolyn Maloney (D-N.Y.), would direct the Financial Crimes Enforcement Network to create a national database that banks could use to verify a business’s beneficial ownership information. The bill was amended before passage to include legislation championed by Rep. Emanuel Cleaver (D-Mo.) that would modernize the existing anti-money laundering/Bank Secrecy Act framework by, among other things, enhancing bank-law enforcement communications.

Also, a bipartisan group of 28 House members last week called on the Financial Stability Oversight Council to require that the OFR study potential financial stability effects of the CECL model for loan loss accounting, which goes into effect for large reporting companies in January. ‌

Specifically, the lawmakers called on OFR to study CECL’s procyclical characteristics and their effects on access to credit and market volatility; the effects of CECL on the solvency and leverage of financial institutions; and the effects of procyclicality on institutions complying with CECL, including contagion risk during times of economic stress. Read the letter.