ALEXANDRIA, Va. — Approximately 45% of federally insured creditunions would have to develop extensive interest rate riskmanagement policies that include extensive use of risk measurementsystems and internal controls, according to a rule issued by theNCUA on Thursday.

Those credit unions covered by the rule would have to: Adopt aninterest-rate risk policy; have a plan for the policy to beimplemented by the institution's management and overseen by theboard; put in place risk measurement systems to assess thesensitivity of earnings and/or asset and liability values tointerest rate risk; adopt internal controls to monitor adherence tointerest rate risks; and make decisions that are “informed andguided by interest rate risk measures.''

The rule applies to all FICUs with assets of more than $50million. Those institutions with assets of between $10 million and$50 million must comply if the total of first mortgage loans theyhold combined with total investments with maturities greater thanfive years is greater than 100% of their net worth.

NCUA Chairman Debbie Matz said at Thursday's NCUA Board meetingthat the rule, which was first proposed last year, is neededbecause while “banks have steadily reduced their interest rate riskexposure since 1995, credit unions have increased their exposure bymore than 50%.''

She noted that credit unions hold nearly 31% of their assets inlong-term fixed-rate mortgages, compared to only 18% at banks.

Larry Fazio, who runs the agency's Office of Examination andInsurance, said interest rate risk has “long been a supervisoryexpectation,'' but the rule is needed in light of the added risksthat credit unions face.

He added that the agency has seen a “continual increase,'' incredit unions taking more risks and this could increase theexposure of the NCUSIF, which is why the rule is necessary.

The issue of interest-rate risk has been dealt with by all bankregulators. Recently, the NCUA, the Federal Reserve, the FDIC, andthe Office of the Comptroller of the Currency issued a joint letterurging aggressive steps to monitor the risk.