The NCUA has removed interest rate risk from the agency's risk-based capital proposal and plans to introduce a separate IRR rule in the future.
"That proposed rule is likely to come to the board in the first half of 2015," John Fairbanks, NCUA public affairs specialist, said Monday.
Paul Gentile, president/CEO of the Massachusetts Credit Union League, New Hampshire Credit Union League and the Credit Union Association of Rhode Island, attended an Oct. 30 meeting with NCUA Board Chairman Debbie Matz and other agency staffers where several regulatory issues, including IRR, were discussed.
"The way interest rate risk was accounted for in risk-based capital was not appropriate," Gentile told CU Times Monday.
He applauded the NCUA's decision to remove IRR from the risk-based capital proposal but said a separate IRR rule might not be necessary.
"I don't think we necessarily have to have that rule going forward," Gentile said. "We have an IRR regulation on the books, we have policies and procedures for what credit unions need to do so I'm not sure we need anything further than what we already have."
Gentile said the NCUA often makes IRR sound like a new issue.
"This is not a new development. With some of the language coming out of the agency, you would think IRR was just invented. Credit unions have been managing IRR for 75 years," he said.
He added, "This isn't the only time rates were low and I stressed to NCUA they should not be writing an IRR reg in light of the prolonged rate environment. They should write a reg that accounts for any rate environment."
Effective Jan. 1, Gentile will become president/CEO of the Cooperative Credit Union Association. In October, credit unions in Massachusetts, New Hampshire and Rhode Island voted in favor of merging the three state leagues.
Carrie Hunt, NAFCU senior vice president of government affairs and general counsel, also agreed with the NCUA's decision.
"We are glad that NCUA is moving in this direction. We have steadfastly expressed our concerns that a risk-based capital rule is not the proper mechanism to control for interest-rate risk, and that capital is not a substitute for proper management or effective examinations," she said. "Moreover, credit unions must already follow stringent interest-rate risk management requirements, and NCUA has provided a large amount of guidance on the issue."
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