ARLINGTON, Va. — NCUA has been stressing to credit unions for well over a year that they must pay attention to interest rate risk with rising rates on the horizon.
But a NAFCU study indicates that CUs think that they have interest rate risk under control.
NCUA is stepping up examiner attention to interest rate risk, stating in its January Letter to Credit Unions that interest rate risk is a primary focus for examiners and that it "is the most significant risk the industry faces right now."
Respondents to NAFCU's August Economic & CU Monitorsurvey of its membership indicated that they will be prepared to manage interest rate risk when rates rise without any regulation or rule in place requiring them to do so.
A large majority (72.2%) of survey respondents have already shortened their investment portfolio duration, with the next most popular option being a shortened real estate portfolio duration.
Just 13.9% are using derivatives as part of their strategy, a larger number are considering the use of interest rate swaps (20%), caps (23.5 %) and floors (20.6%).
CUs are paying close attention to their asset liability management committees, with more than three-quarters of survey participants (82.9%) receiving ALM team recommendations for addressing interest rate risk, and 96.6% of those taking action on the advice to reduce interest rate risk exposure.
As for when the U.S. economy will see a marked rise in rates — 47.2% of respondents predict that will happen in the second half of 2015.
