Market Volatility Prompts NCUA To Require Comprehensive Interest Rate Risk Policy

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ALEXANDRIA, Va. – The NCUA Board this morning proposed a rule that would require credit unions to develop a written interest rate risk policy and interest rate risk management program as a requirement for federal deposit insurance.
The proposal comes amid growing uncertainty on interest rates caused by new Federal Reserve policies, the ballooning federal deficit and the turmoil in the Middle East and its affects on rates, NCUA said. In addition, credit unions exposure to interest rate risk has risen in recent years, due, among other things, to a growing portion of assets–now almost 35%–tied up in mortgages. That compares to just 20% for banks.
In proposing the rule, NCUA explained there is no one-rule-fits-all approach but that every credit union needs to devise its own policy based on individual aspects and conditions of the institution.

The rule, issued for a 60day comment period, would exempt credit unions under $10 million in assets and credit unions up to $50 million with a percentage of first mortgages and investments greater than five years that is less than 100% of net worth. 

ALEXANDRIA, Va. – The NCUA Board this morning proposed a rule that would require credit unions to develop a written interest rate risk policy and interest rate risk management program as a requirement for federal deposit insurance.

The proposal comes amid growing uncertainty on interest rates caused by new Federal Reserve policies, the ballooning federal deficit and the turmoil in the Middle East and its affects on rates, NCUA said. In addition, credit unions exposure to interest rate risk has risen in recent years, due, among other things, to a growing portion of assets–now almost 35%–tied up in mortgages. That compares to just 20% for banks.

In proposing the rule, NCUA explained there is no one-rule-fits-all approach but that every credit union needs to devise its own policy based on individual aspects and conditions of the institution.

The rule, issued for a 60day comment period, would exempt credit unions under $10 million in assets and credit unions up to $50 million with a percentage of first mortgages and investments greater than five years that is less than 100% of net worth.

 

 

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