WASHINGTON (5/24/11)--The National Credit Union Administration (NCUA) has not fully demonstrated a need for a new interest rate risk rule, especially one that makes compliance with the rule a condition of keeping National Credit Union Share Insurance (NCUSIF), the Credit Union National Association (CUNA) has said. The NCUA earlier this year proposed amending its federal share insurance regulations to include a requirement that federally insured credit unions have both a written interest rate risk (IRR) policy and an effective interest rate risk management program. The proposal would not apply to credit unions with less than $10 million in assets and credit unions with assets of $10 million to $50 million that meet set mortgage and investment volume criteria. Those covered by the rule would need to address IRR from several sources, including re-pricing risk, yield-curve risk, spread risk, basis risk and options risk. The agency could withhold NCUSIF coverage of member accounts for credit unions that did not comply with the proposal if it is adopted. CUNA in its comment letter said that it “has consistently supported appropriate safety and soundness regulations that are well-tailored to address problem areas and that enhance strong yet reasonable oversight,” but added that the agency has not justified the need for the rule. Also, tying compliance to federal share insurance coverage, with the possibly of losing coverage, would be “a punitive and unnecessary step that the agency does not need to take,” CUNA said. Noting the budensome regulatory environment under which credit unions operate, CUNA added that the proposal, if adopted, “would result in significant overlap between the rule and existing agency guidance on asset/liability management and concentration risk.” The NCUA already has the supervisory mechanisms needed to “monitor, assess and direct corrections be made to any deficiencies in credit unions’ interest rate risk policies and management,” CUNA added. The IRR proposal could also allow some agency examiners to micromanage the credit unions they oversee, CUNA warned. The NCUA has previously estimated that about 25% of credit unions, or around 800, would need to develop written IRR policies if its proposal is made final. CUNA suggested that the NCUA first focus on these credit unions before it imposes a broader rate-risk proposal. CUNA noted that the proposed guidance could be useful to credit unions, as long as it is not a regulation, and that the agency should post it on its website as a resource for credit unions. For the full comment letter, use the resource link.