Search: "credit risk"

If You Think Changes in Payments Won’t Impact Your ALM and Interest Rate Risk Management―Think Again

There are bites – small and LARGE – being taken out of credit unions’ non-interest income. Just consider: PINless PIN. Apple Pay – or the pay option du jour (e.g., Bitcoin, Samsung Pay, etc.). The increase in payments via ACH, including P2P. The decline in ODP. As these bites are being taken out of revenue, decisions […]

Observations from ALM Model Validations: NEV – Loans Devalue in Rate Shocks – or Do They?

When considering valuation as a measure of interest rate risk, and value volatility as an indicator of changes in interest rate risk, many institutions perform net economic value (NEV) analysis. When working with credit unions, or performing model validations, a concern many have is ensuring the models have the “right” assumptions. What is the “right” […]

Model Risk Management

Model risk involves the use of financial models, and the potential that errors in setup, input, or interpretation of results can lead to material misstatement of results. Model risk can be present in internally created financial models or in vendor-supplied financial models and/or results. Having a model’s mathematics validated periodically (important only if there is […]

Forecasting Considerations

Many credit unions have started their budget and, similar to prior years, stress testing key assumptions should be an important part of the budget process. Last year, we emphasized the importance of testing out different rates of loan growth. While that continues to be an important stress test to perform, provision for loan loss (PLL) […]

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