Search: "credit risk"

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) […]

NEV: Do the Values Make Sense?

There is some debate regarding reasonable methodologies and approaches for loan discount rates for an NEV analysis. Discounting to the current offering rate, to a comparable asset-backed security rate and including a credit risk spread are just a few of the approaches that are debated. Regardless of the assumptions approach, the values need to make […]

Concentration Risk in Non-Interest Income?

NCUA cited the Basel Committee on Banking Supervision when defining concentration risk in NCUA Supervisory Letter – Concentration Risk: “A risk concentration is any single exposure or group of exposures with the potential to produce losses large enough (relative to capital, total assets, or overall risk level) to threaten a financial institution’s health or ability […]

We Are Outside of Our A/LM Risk Limits. Should We Change Them?

There is tremendous pressure on earnings from increasing costs due to regulations, compliance, technology and delivery channels to name a few. Margins are also tighter than in the past. To help compensate for reduced profitability, credit unions often take on more risk, such as interest rate risk and credit risk, to protect current earnings. However, […]

Thank Goodness the Proposed Risk-Based Capital Rule Doesn’t Affect Me!

If you’ve looked at NCUA’s calculator and determined that the rule won’t hurt you, go ahead and breathe a sigh of relief.  Then set aside some time to at least look at the table of risk weightings and some of the many analyses that have been done by various groups.  This is a cooperative industry […]

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