Proposal Addresses Interest Rate Risk Management

In March the NCUA Board issued a proposed amendment to Part 741 that would require certain federally insured credit unions to have a written policy to address interest rate risk management, as well as an effective IRR program for successful asset liability management.

by NWCUA Director of Compliance Services Mary Sroufe  

At its March 17, 2011, board meeting, the NCUA Board issued a proposed amendment to Part 741 that would require certain federally insured credit unions (FICUs) to have a written policy to address interest rate risk (IRR) management as well as an effective IRR program for successful asset liability management. The Board also approved draft guidance, as an appendix to the rule, to assist credit unions in meeting the proposed regulatory requirements.

To ensure credit unions are prepared for inevitable interest rate increases, NCUA believes certain FICUs need a written IRR policy that explicitly states their credit union’s IRR tolerance. An effective IRR program identifies, measures, monitors, and controls IRR and is an essential component of safe and sound credit union operations.

The proposed rule does not apply to credit unions with less than $10 million in assets. FICUs with assets between $10 million and $50 million must have a written policy if their total of first mortgage loans plus total investments longer than five years is equal to or greater than 100 percent of their net worth. All FICUs with assets over $50 million must meet the written policy requirement. The IRR proposal was issued with a 60-day comment period.