Recent NCUA Exams Focused on IRR Policies

In a recent CUNA Pressing CU Compliance Issues webinar, Jeff Anderson from PolicyWorks LLC said that credit unions have been reporting that the new requirement for interest rate risk (IRR) policies has been a major focus for the National Credit Union Administration (NCUA) in recent exams.

When the NCUA board of directors approved the final IRR rule, which was released in February, it stated that the regulation’s intent is to ensure credit unions are prepared for the inevitable interest rate increases. While not all credit unions are covered under the rule, those within its scope must develop and adopt a written policy on IRR management and develop and adopt a program to implement the policy.

The rule applies to credit unions with more than $50 million in assets as well as credit unions in the $10 million to $50 million asset range that have significant IRR exposure. A significant exposure is defined as the total of first mortgages plus long-term investments that exceeds 100 percent of the credit union’s net worth. Credit unions under $10 million are exempt from this requirement.

The written board-approved IRR policy must address:

  • The parties responsible for IRR management activities, including review and monitoring of IRR;
  • All actions that are sufficient to manage IRR, including measurement and monitoring methods, and IRR reduction alternatives;
  • The reporting frequency of the IRR results to the credit union’s board;
  • Clearly defined risk limits for IRR exposure;
  • Tests that will be performed;
  • Periodic reviews of any material changes in IRR exposure;
  • Reviewing IRR impact of all new business initiatives; and
  • Periodic policy review by the board—at least annually.

The updated exam questionnaire that the NCUA provided in Letter to Credit Unions 12-CU-05 contains the following three questions:

  • Does the credit union have policies addressing IRR practices?
  • Do the officials monitor the credit union’s exposure to interest rate risk on a periodic basis?
  • Are there any future events forecasted by the credit union that may have a material impact on the balance sheet structure (e.g. new loan, share, or investment strategies, merger, aggressive growth strategy)?

Resources are available for Northwest credit unions that are still developing their policy or would like a model policy for comparison. Northwest Credit Union Association (NWCUA) member credit unions that have already registered for CU PolicyPro need only to look at policy number 5300 – Interest Rate Risk Management. NWCUA member credit unions that have not yet registered for CU PolicyPro access should register online for this enhanced compliance service.


Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, NCUA.