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National Credit Union Administration

National Credit Union Administration. National Credit Union Administration. Supervisory Emphasis for new Interest Rate Risk Regulation. Financial Trends -Federally Insured Assets Under Supervision. Financial Trends -Capital. Financial Trends -Earnings.

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National Credit Union Administration

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  1. National Credit Union Administration

  2. National Credit Union Administration Supervisory Emphasis for new Interest Rate Risk Regulation

  3. Financial Trends-Federally Insured Assets Under Supervision

  4. Financial Trends-Capital

  5. Financial Trends-Earnings

  6. Financial Trends-Longer Term Real Estate Loans

  7. Financial Trends-Complex Investments

  8. Financial Trends-Long Term or Complex Assets

  9. Supervisory Emphasis-Interest Rate Risk Section 741.3(b)-Interest Rate Risk Policy and program • A written interest rate risk policy; and, • An effective interest rate risk management program as part of asset liability management. • All FICUs with assets > $50 million; and, • FICUs with assets > $10 million and < $50 million, and First Mortgages + Investments>5 years ≥ 100 Net Worth%

  10. Mortgage products and sensitive deposits require robust IRR management. • Concentrations require in-depth analysis.Generous caps on mortgages increase the products interest rate risk. • High share dividend rates can lead to states of over funding. • Mortgage products and sensitive deposits require more robust IRR management.

  11. An effective IRR program accomplishes four things: • Identify IRR • Measure IRR • Monitor IRR • Control IRR…

  12. The Board has ultimate Responsibility: • The board establishes policy to ensure management monitors and controls interest rate risk in a way that is consistent with strategy and guidelines. • Management is to ensure that appropriately skilled resources, tools, and controls are in place to evaluate, control, and report on risk exposures.

  13. Asset Liability Management Committee (ALCO) • The strategic implementation of IRR management. • ALCO makes or informs business decisions and ensures appropriate resources are used in IRR management.

  14. Treasury Function • The tactical implementation of IRR management. • This management team owns the data, manages the tools, and generates the reports.

  15. Strategy • Balancing the mix of assets and liabilities in an effort to “match funding” and employ natural hedges. • Knowing when to turn faucets on and when to turn them off

  16. Authorities • Who has the authority to do what and how much?

  17. Mitigation • Structured and extendable advances that may be effective at reducing the credit union’s interest rate risk. • Simple derivatives are efficient tools to mitigate interest rate risk. • Concentration caps as a percentage of Net Worth.

  18. Reporting • “What gets reported gets managed.”

  19. One Size does not fit all!!! Questions?

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