NCUA allows for CUNA-requested flexibility in IRR framework

September 1, 2022

NCUA issued a Letter to Credit Unions (22-CU-09) Thursday updating its Interest Rate Risk (IRR) supervisory framework. CUNA wrote to NCUA last week sharing credit unions’ IRR concerns and requesting NCUA change its policies to provide greater examiner flexibility.

“We thank NCUA for quickly providing relief for credit unions facing declining Net Economic Value (NEV) Supervisory Test ratings due to the rapidly changing interest rate environment, said CUNA President/CEO Jim Nussle. “NCUA’s actions to provide examiners more flexibility and eliminating the ‘extreme risk’ classification will minimize any adverse impact on credit unions despite unchanged balance sheets.”

 The primary changes to the NCUA’s supervisory framework are:

  • Revising the risk classifications by eliminating the extreme risk classification and modifying the high risk classification;
  • Clarifying when a Document of Resolution (DOR) to address IRR is warranted, including removing any presumed need for a DOR based on an IRR supervisory risk classification and related need for a credit union to develop a de-risking plan;
  • Providing examiners more flexibility in assigning IRR supervisory risk ratings; and
  • Revising examination procedures to incorporate updated review steps when assessing how a credit union’s management of IRR is adapting to changes in the economic and interest rate environment.

Registration is open for an NCUA webinar on these changes Sept. 15, starting at 2:30 p.m. ET.