A Sensitive Focus on Interest Rate Risk

It should be no surprise that regulators and industry executives are concerned about the potential for interest rate risk exposure building on the credit union industry’s balance sheet. We are all aware that credit unions have evolved to meet the needs of members, providing more-complicated products and services while also utilizing funding sources and investments which have also increased in complexity.

The complexity of investment and funding products available today means there are more opportunities for increased interest risk exposure despite holding sufficient levels of short-term liquidity. The current low interest rate environment intensifies concerns regarding the issue as credit union officials grapple with relatively low rates of return on their investments.

These factors have a potential to create a perfect storm environment for credit unions when combined with the significant growth experienced in both membership and assets and as executives work to find investments with adequate returns to cover credit union operational expenses.