Never in the history of the credit union industry has so much emphasis been put on risk concentrations. There is no need to wonder why. High concentrations of certain risks are a major cause of credit union failures.
What is unique about our current environment is the number of risks that have materialized into losses during recent years. So it's no longer just interest rate and default risks that are getting the attention of examiners. These days other risks are being emphasized with equal fervor, such as, collateral, liquidity, transaction, delivery channel and third-party risks, just to name a few.
And hovering over all these risks is concentration risk, which is having a proportionately high level of any one risk. The concern is that in the event the risk should materialize, the credit union's earnings would deteriorate significantly.
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