c. myblog

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 […]

October 19, 2012

Interest Rate Risk Modeling—Do The Results Make Sense?

Many credit unions are increasing the number of “What-Ifs” they run. It is important that decision-makers do a gut check on the results being presented.  It is also important to understand that various modeling methodologies may need to be used to ensure appropriate evaluation of the decision. Take, for instance, a decision to expand auto lending […]

April 16, 2012

Is NEV Capturing The Risk Of Declining Asset Yields?

Short and long-term market rates have been at—or near—record lows for almost 3.5 years.  This has resulted in credit unions continually replacing higher-yielding assets with lower-yielding assets.  This is creating earnings challenges at many institutions, particularly as the cost of funds is nearing a “floor.” So, is your NEV analysis reflecting this risk?  The answer […]

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