Interest Rate Risk (IRR) – This section of the Examiner’s Guide addresses the following topics:
- What is interest rate risk (IRR)?
- Why does NCUA evaluate a credit union’s IRR exposure?
- What are the types and sources of IRR?
- How does IRR relate to other risks?
- Methods and Processes to measure IRR
- Net Interest Income (NII) Simulation
- Net Economic Value (NEV)
- Duration Analysis
- Convexity
- Net Interest Income vs Net Economic Value
- Gap Analysis
- Stress Testing
- Scenario Testing
- Operational Considerations
- Sensitivity Analysis
- Assumptions
- Non-Maturity Shares
- Prepayments
- Measurement Systems
- Management Responsibility
- System Capabilities
- Data Integrity
- Adequacy of Data Inputs
- Account Attributes
- Chart of Accounts
- Aggregation of Data
- Assumptions
- Model Risk
- Model Governance and Validation
- Reporting and Documentation
- Risk Management Framework
- Management Oversight
- Policies and Processes
- Internal Controls
- Risk Limits
- How does IRR impact a Credit Union’s financial position?
- Net Worth and Net Economic Value
- Earnings
- Liquidity
- Mitigation Strategies
- IRR Examination Procedures
- IRR References