Tuesday, April 02, 2013

SIRRT II ..... Risky Business.

Silly WildAss Guessing
Talked a little last week about the Supervisory Interest Rate Risk Threshold (SIRRT) ratio which was created - apparently out of thin air - by "we can't tell who" at the NCUA. 

SIRRT is a seriously silly measurement which would be of little harm if credit unions didn't have to take the NCUA seriously - but we should and most of us try to do so.  SIRRT again is simply a credit union's mortgages + investments with a maturity greater than 5 years divided by the credit union's net worth.

In the Federal Register (Vol. 77, No. 22 - 2/2/2012, pg. 5158), NCUA has this to say about the numerous objections that CU commenters made about SIRRT: " The comments on the SIRRT ratio overlook the fundamental reasons for reliance on the ratio.  Net worth is the reserve of funds available to absorb the risks of a credit union, and it is therefore the best measure against which to gauge the credit union's risk exposure. A credit union where the SIRRT is at or over 1:1 is exposed to IRR at a heightened level."  "NCUA therefore concludes that the SIRRT ratio effectively partitions risk."

Bull Chip!!
NCUA is making stuff up in the above public statement... "fundamental reasons"... "best measure"...."at or over 1:1 is exposed to IRR"... "at a heightened level"... "effectively partitions risk." Three comments about NCUA's faux analyses (you can say it, but it don't make it so !); it's 1) not true, 2) it's amateurish, and 3) it's scary because a) NCUA is unaccountable for its silliness, b) these are the very same folks who missed on the Corporates and bankrupted the NCUSIF, and c) look how SIRRT is being used "out in the provinces" by NCUA examiners...
Please note this is an "official" NCUA
presentation slide recently shown in NC !!
Want to guess what one of the key ratios was in determining "RISKY STATES" ... that's right SIRRT( you catch on quickly!).

Say What ?? (D-NJ)
Say What ?? (R-NJ)


Do Cory Booker and Chris Christie know that NCUA has unilaterally declared NEW JERSEY "THE RISKIEST STATE IN AMERICA"??

And is this the real reason that........

....Paul Gentile fled the State so abruptly for Washington, D.C. ????

(Would imagine that some "Jersey Boys" would like an explanation !)

... or is the "state risk ranking" just as silly as SIRRT and should be equally ignored ??


Anonymous said...

Could not help laugh at the State of Delaware being of the list of risky states and a concern for NCUA with their new interest rate risk tool. For the record, Delaware has about 20 credit unions. All are Federally Chartered and Insured. Long history of NCUA supervision. SECU has a greater ROA than the total assets of all credit union in Delaware. NCUA is forcing a credit union with over 15% capital to merge. Delaware is a poster child for the failure of the NCUA examination process.

Jim Blaine said...

Guess this is sort of a statewide CAMEL rating for ....

.... Sorry, nevermind.