The OIG determined the NCUA took steps to identify and address credit unions with interest rate risk concerns, but stated the addition of an S rating would improve the agency's ability to accurately measure and monitor interest rate risk by separately assessing a credit union's sensitivity to market risk.

The OIG recommended that the NCUA add an S rating for market risk sensitivity and revise the L rating to reflect only liquidity factors.

Under its current structure, the acronym CAMEL is derived from the following components: [C]apital Adequacy, [A]sset Quality, [M]anagement, [E]arnings and [L]iquidity/Asset/Liability Management.

The audit was conducted by interviewing NCUA staff, reviewing NCUA guidance, policies, procedures and other interest rate risk information. Additionally, the OIG selected a credit union from each of the NCUA's five regions and analyzed the corresponding examination and supervision reports and related documents.

Regional staff and examiners play essential roles in determining which credit unions have elevated IRR and assessing and addressing IRR concerns. Additionally, the NCUA's IRR working group formed by the agency is refining the process needed to develop examination-based IRR assessment tools, according to the report. As a result, the OIG said it will revisit this objective later, allowing the agency time to develop the process.

The NCUA adopted the CAMEL rating system in October 1987; however, the system was revised by the Federal Financial Institutions Examination Council to add an S in 1996. The FDIC, the OCC and the Board of Governors of the Federal Reserve System began using the CAMELS rating system on Jan. 1, 1997.