WASHINGTON (8/8/12)--Credit unions have to comply with the new rule regarding interest rate risk policies by Sept. 30 and the National Credit Union Administration (NCUA) has issued a document answering frequency asked questions.
The agency notes that compliance with the rule will be one of the preconditions for federal deposit insurance and its examiners will "review the policy and asset liability management programs for effective identification, measuring, monitoring and control of interest rate risk. The objective is to implement the rule consistently while taking into account size and complexity differences among FICU's.''
Credit unions between $10 and $50 million in assets where the Supervisory Interest Rate Risk Ratio ( SIRRT) ratio is less than 100% are exempt as are credit unions with assets of less than $10 million.
"The SIRRT ratio is calculated from call report fields. Total First mortgages is added to Total investments 5 years and greater and then divided by total net-worth. The result of the calculation is a ratio,'' according to the NCUA document (Letter to Credit Unions 12-CU-11).
Its purpose is to "to reduce regulatory burden without adding new reporting requirements to the call report,'' according to the document.
Credit union boards must approve these plans. Among the items that must be part of these each plans are statements of direct actions to ensure that management identifies, measures and monitors interest rate risk and a plan for assessing the impact on interest rate risk before launching new products.
The letter supplements previous letters which dealt with specific sources of risk such as non-maturity shares, liquidity, real estate concentration and balance sheet risk.
Use the resource link to access the NCUA letter.