Search: "credit risk"

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 […]

Strategic Plans And Quantifying Risk

In the recently issued Interest Rate Risk Questionnaire, the NCUA devoted an entire section to evaluating if decision-making is informed by interest rate risk measurement systems.  The guidance specifically references interest rate risk “what-if” testing in conjunction with strategic plans and operational decisions—and that “what-if” analysis outcomes should be documented within the strategic plan to […]

Net Interest Margin and Risk Limits

A/LM measurement systems, policies and defined risk limits are intended to help ensure that credit unions do not take unacceptable risks relative to their insurance—which is net worth. While this sounds straightforward, much depends on the measurement system and policies in place. Consider the example of a credit union that uses net interest income (NII) to […]

Excerpt: Silo Risk Management Needs To Stop

Many credit unions are beefing up their risk management process.  However, a critical component of the risk management process that is missing for many is evaluating and managing risk in aggregate. According to conventional wisdom, risk is quantified and managed in silos—including interest rate risk (IRR), credit risk, concentration risk, etc.  External forces no longer […]

Planning For PLL

Given the economic experience of the past couple of years, many credit unions were forced to beef up their loan loss reserves.  Now, as things appear to be getting better, we are seeing that some credit unions feel they are “overfunded” and are not adding to their reserves.  While this may provide some temporary relief […]

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