The Financial Accounting Standards Board is reviewing a request from a group of mid-sized financial institutions to revise the new credit losses rules in a way the board has apparently already considered and dismissed.

Nearly two dozen banks and the American Financial Services Association signed a 26-page document submitted to the FASB asking the board to consider a change to Accounting Standards Codification Topic 326 to retain the pattern of loss recognition but alter the effect on earnings. “We will carefully review the proposal submitted by the banks and determine if further action is warranted,” a FASB spokesman said.

The board will review and discuss the proposal during an open meeting after some outreach with financial institutions to better understand and digest it, said FASB member Hal Schroeder, chair of FASB’s Transition Resource Group, during a recent TRG meeting. The TRG is fielding implementation questions and making recommendations to the board regarding revisions to the standard that it could or should consider.

All public companies are required to adopt a new way to reflect credit losses in financial statements beginning Jan. 1, 2020. The new standard under Accounting Standards Codification Topic 326 requires companies to adopt a more forward-looking approach to the possibility of losses using a “current expected credit losses” model.

In recent weeks, as models are being refined and tested, banks have appealed to the FASB and the U.S. Treasury to delay the CECL method and study its effects on the economy as a whole. Banks say the accounting is “procyclical,” or has the effect of accelerating any downward turn the economy might take because it would incentivize banks to get more conservative with lending. Members of Congress have also chimed in, asking FASB to delay the standard until it can be studied further.

The new proposal asks FASB to retain the CECL method of establishing upfront losses that must be recognized in financial statements but to allow banks to divide the loss into three parts for purposes of recognizing the effect in income. The banks say loss expectations on loans that are actually “impaired” or are failing should be recognized in net income, as should loss expectations within the first year for loans that are fully performing. For loss projections beyond the first year on loans that are performing, however, the banks are asking to recognize those figures through “accumulated other comprehensive income,” a component of equity on the balance sheet.

Even before the FASB had the written proposal, Schroeder said FASB was aware of the basic ideas behind it and had considered various iterations of separately recognizing the loan loss provision when it developed the standard. “We had basically heard feedback from banks at that time that this would be very difficult for them to do and in many ways would be very costly and arbitrary,” he said. FASB is separately considering some changes to the standard to clarify the language.

The Independent Community Bankers of America does not support the proposal, says James Kendrick, first vice president in accounting and capital policy. “I would be concerned that this proposal might be dangerous for stakeholders by masking credit risk within the institution at a time when credit risk should be most transparent,” he says.

The proposal would place the majority of loss estimate in equity, says Kendrick, even when a bank might forecast a large rise in losses that could produce a risk of failure. The loss recognition would be too late for institutions to take the actions necessary to remain solvent, he says. “This is essentially no different than what we have today under the incurred loss model,” he says.