In today's lending environment, having an effective risk rating system in place helps beyond determining a credit union's loan approval or pricing processes. These systems also impact broader risk management practices, including setting a credit union's reserve, stress testing, determining risk appetites and strategic planning.
With little prescriptive guidance available, credit unions can customize their risk rating system to fit the unique characteristics of their portfolio, and given the NCUA's principle-based member business lending rules, credit unions may be putting more resources toward business loans and the complicated risk rating systems they require.
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