It could take a few years to implement changes that would allow the NCUA to add an S category to the agency's CAMEL rating system to monitor interest rate risk, agency staff told the board Thursday.
Nonetheless, J. Owen Cole, the agency's director of the division of capital and credit markets, said the change would allow for increased clarity and accuracy in monitoring interest rate risk.
He warned, however, that in considering such a change, the agency must take into account other changes it plans to make to the examination process.
Board Chairman Rick Metsger said many states have adopted the change, and that when he recently met with state credit union examiners, none of them said they would object to adding S to CAMEL.
The agency's Office of Inspector General recommended adding the category in a Nov. 13 report.
In that report, the OIG concluded the CAMEL rating system may not produce effective IRR when assigning a composite rating to a credit union. The report also said that in the NCUA's assessment of sensitivity to market risk under the L category of its CAMEL rating system, it may understate or obscure instances of high IRR exposure in a credit union.
The OIG said that adding an S rating would improve the agency's ability to accurately measure and monitor interest rate risk by separately assessing a credit union's sensitivity to market risk.
NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt said the agency should issue a proposed rule before making such changes to ensure the credit union community has the opportunity to comment on the plan.
At Thursday's meeting, the board also agreed to a proposed rule that would implement technical changes to rules governing the Community Development Revolving Loan Fund.
It also adopted an interim final rule to make inflation adjustments to the NCUA's schedule of civil monetary penalties. Metsger said Congress required those changes be made, adding that all civil penalties imposed by the agency are sent to the Treasury and are not retained by the NCUA.
The board also received a briefing on the interest rate supervision process.
Following its public meeting, the board met in a closed session to discuss a supervisory matter.
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