Capital Adequacy

Setting Meaningful IRR Limits Using Empirical Methods


Your A/LM model should be centered on IRR limits.  These IRR limits need to reflect your credit union’s unique goals, equity position, and risk management needs.   Join us December 9th and learn how setting IRR limits using empirical methods helps assure your A/LM process is sound and meets regulatory requirements.

Our discussion on December 9th will:

From a bank regulator's standpoint, the essential purpose of bank earnings, both current and accumulated, is to absorb losses and augment capital. Earnings is the initial safeguard against the risks of engaging in the banking business, and represents the first line of defense against capital depletion resulting from shrinkage in asset value. Earnings performance should also allow the bank to remain competitive by providing the resources required to implement management's strategic initiatives.

The NCUA Board may reclassify a “well capitalized” credit union as “adequately capitalized” and may require an “adequately capitalized” or “undercapitalized” credit union to comply with certain mandatory or discretionary supervisory actions as if it were in the next lower net worth category (each of such actions hereinafter referred to generally as “reclassification”) in the following circumstances: