Credit Union Movement Questions WSJ Article on Interest Rate Risk Management

A June 5 article in the Wall St. Journal today is drawing fire from the credit union movement. In a sweeping story, the publication raises questions about credit unions’ capabilities to manage interest rate risk. Industry leaders point out that credit unions have successfully managed interest rate risk since the 1930s when they were established.

Quoted in the article is NCUA Chair Debbie Matz. “I am concerned,” Matz reportedly told the publication, “that the message [about rates] is either not getting through, or it’s getting through and they are just choosing not to do anything about it.”

Credit union industry leaders quickly took issue with the blanket approach to reporting on an industry they feel is effectively managing its risks.

“That article needed more balance,” said Troy Stang, President and CEO of the Northwest Credit Union Association. “It fails to report on the well-managed performance of the credit union movement on the whole. Credit unions have a long-standing track record of strong interest-rate risk management and take this issue very seriously.”

CUNA also responded to the outplaying of interest rate risk in the national press.

“Our analysis shows that credit union long-term asset exposure is manageable,” noted President/CEO Bill Cheney in his weekly letter to credit unions. “Long-term assets now stand at 35 percent of total assets – a five percentage point increase compared to pre-recession levels, but a reasonable exposure given that it is dwarfed by the 51 percent of assets in net worth and core deposits (regular savings and share drafts).”

NCUA data as of December 2013 found net long-term assets at 37.95 percent of total assets in Washington credit unions, and at 33.81 percent of total assets in Oregon credit unions.

NCUA defines long-term assets differently than do agencies regulating other financial industries. NCUA includes investments with maturities greater than three years, and member business loans regardless of duration. Regulators of other financial industries define those categories as long-term assets only if they have maturities of five years or more.

“If there are individual credit unions posing rate risk management concerns, the regulator certainly has the tools to work directly with them. That would be a better approach than a media interview,” Stang said. “Interest rate risk—rates moving up and down—is at the heart of running every business and every personal household in America.”

Questions about this story? Contact Lynn Heider: 503.350.2225,

Posted in CUNA, Federal, NCUA, NWCUA.