While credit unions have generally benefitted from an improving U.S. economy, interest rate risk remains a significant concern heading into 2015, according to NCUA Chief Economist John Worth.
“The improving economy has implications for monetary policy and interest rates,” Worth said in the NCUA's latest Economic Update video. “While nothing is certain, the improving economy is likely to bring changes to the interest rate environment in the coming year that could prove challenging to some credit unions.”
Worth said forecasters expect interest rates to rise in 2015.
“Overall, the projected rising interest rate environment and projected narrowing of the term spread could pose challenges to credit unions. Especially vulnerable are those that have developed loan and deposit portfolios that are sustainable only in a falling or low rate environment,” he said.
Although quarter three results were positive for the credit union system overall, Worth said small credit unions in particular appear to face significant challenges that an improving economy cannot entirely overcome.
“NCUA has recognized challenges and worked to eliminate unnecessary burdens on these credit unions through rule exemptions and provide support and training through the Office of Small Credit Union Initiatives,” he said.
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