The information includes the most commonly asked IRR questions the NCUA took away from four webinars on the topic, including responsibility for the creation, oversight and management of the required IRR written policy and program, measurement and monitoring requirements, internal controls, and what influence the IRR should have on management decisions.
When the rule becomes effective, examiners will use an examination questionnaire the NCUA distributed in May. Credit unions should “consider the guidance this provides to examiners as you evaluate the credit union’s policies and program,” the NCUA said in the new letter.
However, the NCUA said examiners will not use guidance included in Appendix B of the rule “in a checklist type manner”, but rather, will “look at the size and complexity of your credit union and work to determine whether the program is effective.” The guidance focuses on the core components necessary for an effective risk mitigation program and describes best practices credit unions can consider as they write their IRR policy and develop IRR management programs.
The question-and-answer sheet also addresses the rule’s Supervisory Interest Rate Risk Ratio, which will be used to determine which credit unions will be subject to the rule. The SIRRT is calculated by adding total first mortgages to total investments with terms of five years or longer, and then dividing the result by total net worth.
Credit unions with fewer than $10 million in assets are exempt from the rule, as are those with between $10 and $50 million in assets that have an SIRRT ratio less than 100%.