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NCUA today looks at low-risk assets interest-risk
ALEXANDRIA, Va. (3/17/11)—A proposed rule on interest rate risk policy is expected to be released when the National Credit Union Administration (NCUA) Board holds its March open meeting later today. The Credit Union National Association’s (CUNA) Examination and Supervision Subcommittee will be closely reviewing the proposal and helping to formulate CUNA’s comments. The NCUA and the other regulators that comprise the Federal Financial Institutions Examination Council (FFIEC) early last year instructed credit unions and other financial institutions to ensure that they have the sound risk-management practices needed to “measure, monitor, and control IRR exposures." Those management practices must include “processes and systems commensurate” with the “complexity, business model, risk profile, and scope of operations" of the given financial institution. CUNA Senior Economist Mike Schenk at that time noted that low home prices, low mortgage interest rates, and government purchase incentives had translated into a fairly high volume of originations of fixed-rate, long-term mortgages, which can equal increased interest rate risk. However, Schenk added, while interest rate risk exposure did increase, it can be limited when balance sheets are viewed broadly. “Credit unions have a long track record that makes it clear that they are very good at measuring, monitoring and controlling this risk," Schenk added. The NCUA last year removed a scheduled discussion of a proposed rule on interest rate risk policies from the list of items to be considered at its June board meeting. The net worth proposal is expected to implement recent Federal Credit Union Act amendments that allow credit unions to count 208 assistance as net worth during mergers and other situations. CUNA supports this change. CUNA Deputy General Counsel Mary Dunn added that the NCUA's planned Corporate credit union technical changes, net worth and equity ratio definitions, and low-risk asset definitions are also on the agenda for today’s meeting. The NCUA's monthly report on the status of its insurance fund will also be delivered during the meeting. A closed NCUA session will follow the open meeting. Insurance appeals and supervisory matters will be discussed during the closed meeting. For the full NCUA meeting agenda, use the resource link.
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