Federal Regulations

Capital Planning Requirements:

How should management implement the Board (IRR) policy?

A written (IRR) policy should:

Why is the Interest Rate Risk (IRR) rule written as a requirement for insurance?

Interest rate risk is a core risk which confronts FICUs; similar risks exist with regards to lending and investments for which regulatory requirements for insurance already exist. As a requirement for insurance the rule applies to all FICUs. The rule combines the many elements of asset liability management into a comprehensive framework for managing core risk. Of the seven risks in a risk focused exam, Interest Rate Risk is the primary concern of the rule.

(NCUA)  encourages you to review the new IRR rule on the NCUA website located at http://www.ncua.gov/Legal/Regs/Pages/FIRegulations.aspx.

If your credit union holds between $10 million and $50 million in total assets, you should determine whether the new rule applies to you as determined by your SIRRT ratio on the most recent Financial Performance Report.

Your credit union is subject to the requirements of the final rule if:

• Your credit union’s assets exceed $50 million, as shown by your most recent Call Report filing; or

• Your credit union’s assets are equal to or greater than $10 million but do not exceed $50 million and the sum of your first mortgage loans held and investments with maturities exceeding five years is equal to or greater than 100% of your net worth at quarter end.

Beginning on September 30, 2012, certain federally insured credit unions (FICUs) will be required to adopt a written policy on interest-rate risk (IRR) management and a program to implement it effectively.

NAFCU supports a risk-based capital system for credit unions. We support less capital for lower-risk credit unions and more capital for higher-risk credit unions. However, we continue to believe that we need Congress to make statutory changes to the FCU Act to achieve a fair system.

As NAFCU has previously stated, the size of an institution does not determine the complexity of the assets and liabilities of a given credit union. There are many credit unions with well over $50 million in assets that are run out of one branch with only a handful of employees that often engage in only the most basic of transactions for members.

NAFCU questions whether NCUA has the statutory authority to institute individual minimum capital requirements. Under the proposed rule, NCUA introduces a new power to raise individual minimum capital requirements for credit unions “that varies from any of the risk-based capital requirement (s) that would otherwise apply to the credit union…”