Friday, June 10, 2016

Wisconsin CU Regulator to Add S to CAMEL

Effective July 1, Wisconsin's Office of Credit Unions (OCU) will add "Sensitivity to Market Risk" (S) component to CAMEL.

OCU wrote in a May 24 letter that it believes that the implementation of a "S" rating is prudent at this time.

OCU noted that changes in interest rates can impact the earnings and net worth of credit unions. OCU stated that credit unions are expected to have the ability to measure, monitor, and manage interest rate risk exposure.

OCU also pointed out that "[t]he utilization of S component recognizes the increasing balance sheet complexity in Wisconsin credit unions."

OCU noted that the National Credit Union Administration (NCUA) does not use the S CAMEL rating component. However, OCU and NCUA have agreed to a workaround. The lower of the "L" and "S" ratings will be inputted into NCUA's Automated Integrated Regulatory Examination Software for the L component in CAMEL.

On a related note, the NCUA Board on June 16th will receive a briefing on adding S to CAMEL.

Read the letter.
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