BOARD ACTIONS (FROM PAGE 3)
; Oversight by the board of management’s implementation
of the IRR policy;
; Development of risk-measurement systems to assess the
IRR sensitivity of earnings and/or asset and liability values;
; Establishment of internal controls to monitor adherence to
IRR limits; and
;Implementation of a decision-making process that is
informed and guided by IRR measures.
“Our standard for interest rate risk policies is not one-size-fits-all,” added Chairman Matz. “We realize that exposed
credit unions have different risk profiles. So while we are
providing a template policy, we are also providing flexibility
for credit union managers and board members to develop
their own policy. And we are giving affected credit unions
until September 30th to comply.”
NCUA Continues to Explore Options
for Interest Rate Derivatives
The Board voted to release an advance notice of proposed
rulemaking (ANPR) to seek additional public comments to
identify the conditions in which federal credit unions (FCUs)
can engage in certain derivatives for the purpose of offsetting
interest rate risk.
NO MR. NICE GUY (FROM PAGE 4)
I have experienced firsthand what it is like to make decisions
that are not popular. I have heard the voices that have
questioned those decisions and tried to pass the blame. But I
have accepted the responsibility for those that were made as
well as acknowledged the shortcomings of NCUA.
However, early on I said I would not sugar coat what needed
to be done and that the necessary steps would take a long time
and cost a lot of money. I asked the credit union industry to
work with the regulator to solve the problem, put in place what
is essential so that it would never happen again and accept the
fact that there is enough blame to go around for everyone.
Keep in mind, the crisis we faced was unprecedented. The
decisions that were made needed to be made quickly. They
were made for the good of the whole so that the entire
industry could survive. Everyone felt the pain, some more than
others. But that is how a cooperative system works. So, when
someone issues a report, an analysis, a compilation of what
they believe occurred and in that document recommendations
are made, you should read it in its entirety.
“Derivatives can be a useful tool for highly experienced
professionals to manage interest rate risks,” said Chairman
Matz. “Our intent is to safely allow more credit unions to use
derivatives responsibly as a hedge against interest rate risks.
Credit unions that have high interest rate risk exposure on
their balance sheet could offset some of the risk if they
purchase the right types of derivatives.”
Chairman Matz, however, cautioned that several types of
derivatives can be extremely volatile, and choosing the right
rates to hedge at the right time can be a very risky proposition.
“The fact that we have issued two ANPRs on derivatives
demonstrates the complexity of this issue,” she said.
The NCUA Board released an earlier ANPR on derivatives
transactions by credit unions in June 2011. The comments
received on the earlier ANPR are discussed in the ANPR
NCUA issued the ANPR with a 60-day comment period.
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If the steps taken to handle the crisis were successful and
accomplished the ultimate goal of preventing credit unions
from failing and maintained the integrity of the industry, then
they were the right steps.
If during the course of putting everything back in place some
things could have been done better, then let us look upon those
discoveries as a learning experience and make corrections
If we can each do better then by all means let us do so. We
must always keep in mind that it is never easy to make hard
and unpopular decisions that could be criticized. However, if
the decisions are the right thing to do and if the actions taken
solve the problems at hand and put corrective measures in
place, than we are fulfilling our requirements.
Even though the decisions may not please everyone, a
regulators job is not to please, it is rather to do what needs to