NCUA economic video shows interest rate risk lurking behind investment trends
ALEXANDRIA, VA (December 20, 2013) — Fourth-quarter economic trends show positive signs of a stronger economy, but expected changes in the interest rate environment will present challenges to future credit union performance, according to a new economic video analysis released today by the National Credit Union Administration.
The latest video in the agency’s Economic Update YouTube series is available at,https://www.youtube.com/user/NCUAchannel.
In the December update, NCUA’s Chief Economist John Worth examines how credit unions can benefit from the recent improvements in the economy.
“The improving economy is a positive sign for credit unions and their members,” Worth says. “Falling unemployment and improving consumer balance sheets are likely to help boost membership rolls, increase loan demand and improve loan quality.”
However, Worth warns credit unions to be vigilant regarding interest rate risk. He highlights evidence that credit unions are increasingly reaching for yield by lengthening the maturity structure of their investment portfolios. In a rapidly changing interest rate environment, this strategy can boost earnings today but result in significant challenges to credit unions later in the interest rate cycle.
NCUA’s economic update video series is an ideal information resource for credit union board members, loan officers and management and is available on NCUA’s official YouTube channel.
NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the U.S. Government, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 95 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.