There has been a lot of talk lately about the new Interest Rate Risk rules issued by the NCUA. The most asked question, “Do I need a separate Interest Rate Risk Policy?” Before we answer that, let’s discuss the rule.
The first item to point out about this rule is that it may not directly impact all federally insured credit unions. Those credit unions under $10 million in assets are exempt. If your credit union is $10 to $50 million in assets your Examiners will review your SIRRT ratio which stands for Supervisory Interest Rate Risk Threshold. This ratio looks at your Net Worth in relation to total first mortgages held plus total investments with maturities greater than five years. If this ratio equals or exceeds 100 percent then this rule applies to you. Finally, if your credit union’s assets are over $50 million it doesn’t matter what your balance sheet structure is, you must comply with this new rule regardless.
So will you need a separate policy….that depends. NCUA states in the Supplementary Information to the rule that 75 percent of credit unions impacted by this rule already have a program and policy in place. So, if your program identifies, measures, monitors and controls Interest Rate Risk then my recommendation to you is to review your current policy and program in relation to the comprehensive guidance found in the rule. If your policy and program (whether it’s called ALM, IRR, etc.) satisfies the guidance then you should be on your way to making your Examiners happy…if only for a minute.