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In light of the financial challenges faced by credit unions over the past few years and specifically the increasing interest rate risk that comes with many credit unions borrowing short to lend long, the NCUA has refocused its attention on asset-liability management functions. Most recently, the agency issued rules requiring complex credit unions to develop a written IRR management policy and process as part of their ALM responsibilities. The NCUA said such policies will be considered in determining the insurability of credit unions.

The bottom line is your credit union’s ALM policy needs to lessen the possibility of unforeseen future losses caused by changes in interest rates. It’s both a regulatory mandate and strategic management tool. And considering the historic low-rate environment, it requires even more serious interest by your credit union’s staff and those on the asset-liability committee.

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