C. Myblog

Excerpt: The New IRR Rule – Be Prepared

May 24, 2012

The National Credit Union Administration recently issued its final rule requiring “federally insured credit unions to develop and adopt a written policy on interest rate risk management and a program to effectively implement that policy, as part of their asset liability management responsibilities.  The interest rate risk policy and implementation program will be among the factors NCUA will consider in determining a credit union’s insurability” (p. 5,155).

Interest Rate Risk Policy and Program Final Rule” is effective as of Sept. 30.  Credit unions over $50 million in assets are required to have a written interest rate risk policy and an effective IRR program.  Credit unions over $500 million can expect their IRR policies and processes to be put under a microscope.  Credit unions from $10 million to $50 million with first mortgage loans and long-term investments equal to, or exceeding, 100 percent of net worth are subject to these new rules as well.

While we are not proponents of more regulation, this new rule provides a great opportunity – even if it is forced – for credit union managements and boards to ensure they are on the same page with respect to appetite for risk, risk quantification methodology and process.  The timing could not be better as we sit in the lowest rate environment our financial markets have experienced since the 1950s.

To read the full article, please see our c. notes page, available here.

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