Todd Harper, chairman of the National Credit Union Administration, recounts a story he heard not so long ago from a federal credit union examiner who came across a very small credit union still charging 1.9% on car loans. At the time the going rate was 4.5% or higher.
Harper, in his retelling, says the lending team had simply grown so used to years of low interest rates that it hadn’t thought to ratchet up with the Federal Reserve hikes. “Look, the market’s moved,” the examiner chided the credit union. “You should be moving with the market.”
The credit union — “a very small institution,” Harper emphasizes again — adjusted accordingly. “We wouldn’t expect to see that type of behavior in a larger one,” he adds. “And we would treat it very differently.”
The story of this apparent aberration underscores the importance to the top credit union regulator of how the entire industry handles interest-rate risk and liquidity risk, as the battle for deposits grows more aggressive. Harper and his two fellow NCUA board members approved a 2023 supervisory priorities letter to credit unions that emphasizes both factors.
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