c. myblog

May 28, 2015

Betas – An Unintended Consequence of Simplifying Pricing Assumptions

Non-maturity deposits (NMDs) and their treatment in A/LM modeling is often a hot-button topic with examiners and management teams.  While there are key risk characteristics of NMDs not addressed with many methodologies (see previous blog entries below), the topic of this blog concerns NMD pricing assumptions. Blog:  Isolating Interest Rate Risk with a Static Balance […]

May 7, 2015

c. notes – Considering Derivatives?

Credit unions purchase derivatives for interest rate risk (IRR) protection. As we consider the value that can be obtained from derivatives, it also makes sense to ask how that protection may change over time and if there are circumstances that might make the protection not as beneficial. Many of our clients are using or considering […]

May 1, 2015

Comparison of Interest Rate Risk Methodologies

Interest rate risk was originally viewed as a process that should be done in a back room, resulting in volumes of information that was stored on a shelf to be available when examiners walked in. However, the complexity of the world has changed over time and so must the use of tools to help evaluate […]

April 21, 2015

Draft Response to RBC 2.0

As promised in last week’s blog post, our draft response to RBC 2.0 can be found here. Our main objective in writing this response is to convince NCUA that it would be dangerous for the industry, regardless of the chosen methodology, to add an interest rate risk (IRR) component to the proposed rule. IRR is […]

April 17, 2015

Risk-Based Capital Rule 2.0

Even though the Risk-Based Capital Rule 2.0 (RBC 2.0) has been watered-down, it is not good for the industry. Don’t forget a key component of the RBC 2.0 is NCUA’s consideration of adding a separate interest rate risk (IRR) component to risk-based capital. Standardizing IRR, assumptions, and/or approaches to assumptions, guarantees that the unique risk […]

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