2023-2024 Update:

Volatility in the rate environment over the past two years continues to highlight how influential market rate changes can be on valuation metrics like Net Economic Value (NEV). 

As with any model, the assumptions utilized are critical to understand. The NCUA Supervisory Test’s unique prescription for assumed valuations on non-maturity shares can show very different results when compared to NEVs performed with more institution-specific data. Higher rates have exacerbated this challenge throughout the industry. 

​

• Do you understand how the differences in assumptions within these models impact your institution?

• Do you understand the impact if rates move higher from here, remain flat, or if the yield curve declines?

Hundreds of credit unions, including some of the country’s largest and most complex, have reached out to DCG for guidance on preparing for an upcoming exam, assistance with existing DORs, or developing de-risking or risk mitigation strategies. To discuss your credit union’s specific situation, click here to speak with a member of DCG’s dedicated NEV Supervisory Test Task Force.

Forewarned is forearmed.  DCG stands ready to help support your business plan while maintaining positive regulatory relations.

Fall 2022 Update: NEV Supervisory Test Pressures Are “High” – Be Prepared

The NCUA recently granted credit unions some much-needed relief under the NEV Supervisory Test (NCUA Letter 22-CU-09). Institutions are no longer subject to an “extreme risk” classification and categorized as "unsafe and unsound." However, while DORs and accompanying de-risking plans are no longer automatic, credit unions may still receive them, especially given the risk of additional rate increases and further depreciation in asset valuations. 

It is critical that CUs be overly prepared to defend their risk position and have ironclad policies and plans in place to manage balance sheet risks. Now is not the time to let your guard down, but rather to fortify your risk management process.