c. myblog

August 15, 2013

Borrowing Rates Are Up – Other Impacts to NEV

Continuing with our message from last week, if you are running NEV, there are some other changes you will notice as a result of borrowing rates increasing. As pointed out last week, NEV calculations for the current rate environment will result in shares showing increased value as “market rates” (generally represented by borrowing rates) have […]

August 9, 2013

Borrowing Rates Are Up– Now My Credit Union Has Less Risk?

Net economic value (NEV) is often cited as one way to quantify the interest rate risk exposure of a financial institution. While there are many concerns with relying upon NEV to provide good decision information, this discussion focuses on recent changes in interest rates and the resulting impact to the NEV of credit union shares. […]

May 3, 2013

NCUA’s Interest Rate Risk Questionnaire – Starting the Conversation

More institutions are being presented with NCUA’s Interest Rate Risk Questionnaire in advance of examinations and being asked to fill them out. During the preparation for an examination, this may seem like the last thing a busy management team should be concerned with, but it should be taken as an opportunity to refresh credit union […]

March 7, 2013

Interest Rate Risk Prepayment Assumptions Vs. Observed Behavior

When you or your examiner are evaluating assumptions used in your A/LM model to quantify interest rate risk (IRR), is the objective to prove the assumptions are right?  Or, is it to prove that the assumptions are reasonable and (when possible) supportable?  According to NCUA’s IRR Questionnaire, the answer is you and the examiner “should […]

November 8, 2012

Examiner FAQs

We frequently hear about examiner inquiries regarding non-maturity deposit assumptions in credit union A/LM models.  The question is usually along the lines of, “what are the non-maturity deposit assumptions used in the A/LM modeling and how were they determined?” Non-maturity deposit assumptions include pricing sensitivity and withdrawal sensitivity.  When it comes to pricing sensitivity the […]

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