The Financial Accounting Standards Board is facing some fresh political pressure from Congress, this time to answer the outcry of smaller financial institutions objecting to FASB’s planned change to financial instrument impairment rules.

FASB held an open meeting with community bankers to air a “constructive dialogue” about concerns over FASB’s planned model for how to require entities to recognize loan losses in their financial statements. FASB’s “current expected credit loss” model would answer shortcomings in accounting rules exposed during the financial crisis that delayed notice to investors where financial institutions saw signs of distress in their loan portfolios.

The meeting produced “insightful discussion that resulted in what we believe is an improved understanding of the application of the CECL model,” said FASB Chairman Russ Golden in a statement following the meeting. “It reinforces the importance of our ongoing dialogue with stakeholders. In the coming weeks, the FASB will meet publicly to continue to discuss the impairment standard. As a part of the FASB's process, the board will consider the comments of the participants seeking additional re-exposure or other forms of public comment."

The Independent Community Bankers of America issued a statement of its own saying FASB’s proposal would increase loan loss reserves by some 30 percent to 50 percent, which would reduce lending and harm the economy. ICBA is calling on FASB to better understand the potential economic consequences of its model and provide for a simpler method that does not require a day-one recognition of loss with each new loan that is issued.

“ICBA and the nation’s community bankers are calling on FASB to pause the standard-setting process until these concerns have been fully explored and remedied,” said Greg Ohlendorf, president and CEO of First Community Bank and Trust, Lucas White, vice president and director of the Fountain Trust Co., and Tim Zimmerman, president and CEO of Standard Bank in a joint statement. “FASB’s complex accounting proposal would radically change community bank accounting methods, sharply increasing the cost of lending and constricting the flow of credit to local communities.”

Before the meeting, Golden received a letter signed by more than 60 members of Congress expressing “strong concern” over the planned CECL model, which FASB developed in redeliberating proposed Accounting Standards Updates for financial instruments dating back to 2010. FASB must proceed with the utmost caution in finalizing this ASU, as it has the potential to irreversibly damage community banks’ and credit unions’ ability to continue to adequately serve their customers/members and communities and sustain the economic recovery,” the members of Congress wrote.

FASB plans to issue its final standard on credit impairment in the second quarter, according to its technical agenda.