Three Steps All Credit Unions Should Take
As a man of a certain age, I routinely put off tests that I don’t think I should be required to go through; at least without getting dinner and a movie first. But some things make us all a little safer even if they’re not fun and take up more time than they should. While I join most of the readers of this blog in instinctually opposing most regulations and guidance, there are some proposals that are so intrinsic to sound management that I can’t think of a good reason why financial institutions shouldn’t carry them out.
On Friday, the Office of Comptroller of the Currency issued a guidance on stress testing for Community Banks with less than $10 billion in assets. Of course, the guidance has absolutely no impact on credit unions and I’m not suggesting that it should. But it does provide some practical means for credit unions to assess their overall ability to respond to rapid changes in the economic environment. In addition, Chapter 13 of NCUA’s Examination Guide already mandates that examiners assess a credit union’s interest-rate risk; liquidity risk; strategic risk and reputational risk as part of an assessment of a credit union’s asset liability management and this guidance provides an effective means for assessing many of those issues.
According to the OCC guidance, irrespective of size all community banks should be:
