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| Asteroid strikes and NCUA IRR forecasts - both can be disastrous !!! |
Several commenters over the last year or so have railed (rightfully so from what I've seen first hand!) against the relentless "badgering" (68-63!) of credit unions by the NCUA over the issue of interest rate risk (IRR).
Give them credit where credit is due, the Agency at least has been consistent in its fear-mongering about soaring rates. That the oft-predicted, imminent, cataclysmic interest rate event has failed to occur is beside the point to NCUA - as are the lost investment opportunity costs to CUs following their advice. The interest rate asteroidial strike is inevitable! Heed or bleed in your annual NCUA exam report...
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| Capital markets specialist at work! |
So let's take a look at how the NCUA uses its
What have you been told to do with your investments and IRR? Keep it short - right? Then you would of course expect the NCUA to take its own advice, wouldn't you - in the face of soaring rates? The NCUA wouldn't tell us to do one thing and then do something exactly the opposite, would it? Why, that would be a... that would be a... well, that would be a "larry"!
DATE NCUSIF INV. BAL. % INV > 5 yrs
12/31/2011 $11.39B 11.24%
12/31/2012 $11.29B 21.07%
12/31/2013 $11.19B 31.82%
12/31/2014 $11.61B 41.43%
... looks like someone is "reaching for yield"!!
In spite of the impending IRR asteroid strike, about which the Agency keeps harping, the NCUA has almost quadrupled its long term investments (> 5-years), over just the last 3 years!
Sure looks like another "larry"!!!
NCUA: It's become a question of credibility.
regcomments@ncua.gov
NCUA: It's become a question of credibility.
regcomments@ncua.gov
5 comments:
FAMOUS NCUA QUOTES
"Do as I say not as I do."
"Because I can and you cannot."
"My way or the highway."
"I talk you listen."
"I do the rating not you."
"I ask the questions."
"I set the rules."
Well, to be honest, I for one am happy they don't follow their own advice. I'd rather see a healthy earnings on our money!
It's called a double standard.
If you like those earnings, then would guess that we'd all be ok with CUs extending the maturities ( weighted average life -"WAL") of their investment portfolio a bit - right? Sounds reasonable!
But just so we all know the riskiness of NCUA's investment strategy... the $11.3 billion NCUSIF has an avg. weighted life of 4.25 years and an average yield of 1.87%... so in an UP 300 asteroidal interest rate shock... the NCUA will incur an approximate $1.284 BILLION UNREALIZED LOSS on the portfolio....
How do you like them apples?
If the NCUSIF actually incurs substantial losses, who makes up the difference?
Reasonable is a word that is not in the NCUA dictionary.
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