NCUA lobby Lobby of the NCUA.

On Thursday, the NCUA released a Letter to Credit Unions updating its Interest Rate Risk (IRR) supervisory framework. The updates come as, according to the letter, in 2022 the industry has experienced the “sharpest increase in interest rates in decades.”

The NCUA letter stated, “A sharp rise in interest rates may amplify market risk exposure to earnings and capital. This occurs because a credit union’s assets and liabilities do not reprice equally or concurrently. This timing (or duration) mismatch, combined with a sharp rise in interest rates, may result in sharply lower net economic values (NEV) as measured using the NCUA’s NEV Supervisory Test (NEV Test) or the Estimated NEV Tool (ENT).”

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Michael Ogden

Editor-in-Chief for CU Times.

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