Capital Adequacy

For purposes of this part, a credit union must determine its net worth category classification at the end of each calendar quarter using two measures:

(1) The net worth ratio as defined in §702.2(g); and

(2) If determined to be applicable under §702.103, a risk-based net worth requirement

http://www.ecfr.gov/cgi-bin/text-idx?SID=18208fefa74840c64f9baa71245729d...

 

Three primary FDIC examination goals when auditing for Sensitivity risk

Submitted by sevans on Tue, 02/10/2015 - 3:55pm

FDIC examination procedures follow a risk-focused framework that incorporates the Policy Statement's guidelines and efficiently allocates examination resources. Examination scope will vary depending upon each bank's interest rate risk exposure relative to earnings and capital, and related strength of risk management processes. This section of the Manual is intended to provide a thorough background on the interest rate risk management process and examination guidance related to it. It is not an exhaustive study of IRR measurement methods.

Sensitivity to market risk (the S component) addresses the degree to which changes in interest rates, foreign exchange rates, commodity prices or equity prices can adversely affect a financial institution's earnings or capital. For most institutions, market risk primarily reflects exposures to changes in interest rates. The S component focuses on an institution's ability to identify, monitor, manage and control its market risk, and provides institution management with a clear and focused indication of supervisory concerns in this area.

There are seven categories of risk credit union supervision focuses on

Submitted by sevans on Mon, 02/09/2015 - 3:24pm

Risk is the potential that events, expected or unanticipated, may have an adverse effect on the credit union’s net worth and earnings. The seven categories of risk for credit union supervision purposes are Credit, Interest Rate, Liquidity, Transaction, Compliance, Strategic, and Reputation. Any product or service may expose the credit union to multiple risks; these categories are not mutually exclusive.

Mandatory elements of a covered credit union’s capital adequacy plan

Submitted by sevans on Fri, 01/16/2015 - 3:30pm

A covered credit union’s (covered credit union means a federally insured credit union whose assets were $10 billion or more on March 31 of the current calendar year) capital plan must contain at least the following elements:

(1) A quarterly assessment of the expected sources and levels of stress test capital over the planning horizon that reflects the covered credit union's financial state, size, complexity, risk profile, scope of operations, and existing level of capital, assuming both expected and unfavorable conditions, including:

Board approval required before submission of capital adequacy plan

Submitted by sevans on Fri, 01/16/2015 - 3:28pm

A covered credit union's (covered credit union means a federally insured credit union whose assets were $10 billion or more on March 31 of the current calendar year) board of directors (or a designated committee of the board) must at least annually, and prior to submission of the capital plan under paragraph (a)(1) of this section:

(i) Review the credit union's process for assessing capital adequacy;

(ii) Ensure that any deficiencies in the credit union's process for assessing capital adequacy are appropriately remedied; and

Annual capital planning. (1) A covered credit union (covered credit union means a federally insured credit union whose assets were $10 billion or more on March 31 of the current calendar year) must develop and maintain a capital plan and submit this plan to NCUA each year by February 28, or such later date as directed by NCUA. The plan must be based on the credit union's financial data as of September 30 of the immediately preceding previous calendar year, or such other date as directed by NCUA.

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