As a result of this review, several updates are being made with the issuance of this letter. 2ĭue to the changing economic and interest rate environments during 2022, the NCUA reviewed the parameters and risk classifications of the NEV Test and overall IRR supervisory framework. This letter provides additional information and updates to the NCUA’s supervisory framework of interest rate risk (IRR). This letter revises the risk management expectations for credit unions over $50 million in assets described in Letter to Federally Insured Credit Unions 16-CU-08, Revised Interest Rate Risk (IRR) Supervision, effective January 1, 2017. 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). This occurs because a credit union’s assets and liabilities do not reprice equally or concurrently. 1 A sharp rise in interest rates may amplify market risk exposure to earnings and capital. The first half of 2022 experienced the sharpest increase in interest rates in decades.
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