Search: "credit risk"

Aggregating Risks To Net Worth—The Credit Risk Component

During a recent education course, we fielded the following question:  “How do you develop a proxy for a worst-case loan loss assumption when aggregating risks to net worth?” This is a great question and it stimulated lively discussion.  While there is not one right way, the following method has been valuable in developing concentration risk […]

FinTechs vs. Traditional Lenders – Is There a Difference?

TransUnion recently released a study comparing FinTechs to other lenders, and used personal loans issued between 2014 and 2016 as the basis for the study.  The study’s objective is to answer the question, “Are FinTechs different from other lenders?”  Interestingly enough, this is a question credit unions have been speculating on for years in an […]

Recent Uncertainty Highlights The Importance of Evaluating Strategic Net Worth Requirements

The rapidly changing competitive environment and recent natural disasters are reminders of the importance of evaluating strategic net worth requirements. A key component to understanding strategic net worth requirements is taking a deliberate approach to understanding aggregate risk.  In a previous blog post we outlined an approach to help with this process. Two types of […]

Concentration Risk Limits on Mortgage-related Assets and the Unintended Consequences

Not all mortgage-related assets are created equal.  Therefore, using a one-size-fits-all approach in establishing concentration risk limits can lead to missed opportunities or a false sense of security. Concentration risk policies are intended to reduce the impact a risk event could have on a credit union’s balance sheet, financial structure, and/or business model.  The NCUA […]

The Equifax Data Breach and Some Important Considerations

The true consequences of the Equifax breach will remain unknown for quite some time to come. During our recent strategic planning sessions, the business impact of this breach has been a high priority for management teams. They are discussing various issues, such as: Should we change our account opening process? If yes, How should we […]

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