Strengthening economy brings changes in interest rate risk

New Economic Update Video Urges Credit Unions to Prepare for a Rise in Interest Rates

ALEXANDRIA, VA (October 1, 2014) – The U.S. economy’s recent performance has helped produce solid second-quarter results for credit unions, but a changing interest rate environment may prove challenging, according to a new video released today by the National Credit Union Administration.

The latest video in the agency’s Economic Update series, available here, features commentary from NCUA’s Chief Economist John Worth. In the video, he discusses what recent economic data and Federal Reserve statements on monetary policy mean for credit unions.

“Here at NCUA, our chief concern is that credit unions be aware and prepared for the possibility of rising short-term rates,” Worth said. “Credit unions should have a firm idea of how their income statements and balance sheets are affected by a rapid rise in short-term rates.”

As the credit union system moves into a new rate environment, credit unions are encouraged to take advantage of the agency’s interest rate risk resource web page to better understand the risk those changes present.

Recent economic performance helped to produce solid credit union results in the second quarter. For example, sales of new vehicles topped 17.5 million in August, the best monthly sales-price pace since 2006. So far in the third quarter, sales are running at a 17 million unit annual rate, which is the best quarter since late 2005. The rise in demand for new autos, aided by continued economic growth, contributed to the recent growth in credit union loan portfolios. Over the past 12 months, auto loans on credit union balance sheets increased by 17 percent.

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 United States, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 98 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions. At and Pocket Cents, NCUA also educates the public on consumer protection and financial literacy issues.

More News