c. myblog

August 1, 2014

Is Your Interest Rate Risk Model Incorporating the Risk of Deposit Mix Changes?

Recently, we blogged about interest rate risk (IRR) modeling methodologies that can give credit unions a false sense of security. (See blog titled “Is Your Risk Methodology Giving You a False Sense of Security?” Posted on July 3, 2014.) We noted that traditional income simulation seldom incorporates the risk of non-maturity deposit withdrawals or member […]

July 17, 2014

Risk/Return Trade-Off—Part I

Cliché? Yes. Often overlooked in decision-making? Also yes. This current long-lasting low rate environment has lulled some credit unions into ignoring the risk of things changing, such as an increase in rates. The focus on return without proper respect for potential risk has led to a material increase in interest rate risk in some institutions, […]

July 3, 2014

Is Your Risk Methodology Giving You a False Sense of Security?

A recent front page article in the Wall Street Journal caused quite a stir by claiming that credit unions are “piling into longer-term assets, exposing the firms to potentially significant losses if interest rates rise…” The objective of this blog is not to debate whether there is or is not too much interest rate risk […]

June 5, 2014

Net Economic Value and Business Decisions: Do You Understand the Trade-Offs?

As a result of running a net economic value shares at par analysis, it appears that some examiners are trying to force credit union CEOs and CFOs to reduce interest rate risk in a rising rate environment by selling assets. While we won’t argue that some credit unions should consider reducing interest rate risk, using […]

May 15, 2014

Is a Fight for Deposits Heating Up?

We are seeing some financial institutions in pockets of the country raise money market and CD rates.  If you have not done so already, now may be a good time to proactively test the financial, liquidity and strategic impact of a fight for deposits, assuming rates don’t change.

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