The NCUA board received a briefing Thursday on efforts to revise interest rate risk (IRR) supervision and the possibility of adding an “S” to the CAMEL rating system. The briefing did not include a board action.
The NCUA has made several recent revisions to its IRR supervisory approach, and according to agency staff, it is in the process of training examiners in IRR. The NCUA is currently revising its examiners guide, and anticipate issuing a letter to credit unions later this year, once the revisions are finalized.
The CAMEL rating system measures Capital adequacy, Asset quality, Management, Earnings and Liquidity. The “S” would add Sensitivity to market risk to the acronym.
According to the NCUA, NCUA examiners currently look at IRR through the “L” of CAMEL, but would be trained on incorporating it into an “S” area of supervision. The agency believes this should not increase the regulatory burden on credit unions.
The NCUA believes the addition would allow the agency to:
Credit union benefits include:
Most of the other Federal Financial Institutions Examination Council, of which NCUA is a member, have added the “S” to the rating system, separating the rating for liquidity. According to the NCUA, 16 state supervisory authorities also do this.
For addition information on the board briefing, see CUNA’s Removing Barriers Blog, and for coverage of the rest of the NCUA’s June meeting, see “NCUA vote on final inflation rule and technical amendments to CDRLF.”