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Hike the Hill Attendees Hear Details on NCUA CAMEL Rating Changes & Meet Board Member

Kansas and Missouri credit union leaders were on hand as the National Credit Union Administration (NCUA) Board discussed potential changes with significant potential impact to Heartland Credit Union Association (HCUA) member credit unions during its June 16 meeting. Immediately following the meeting, HCUA Hike the Hill attendees met with NCUA Board Member Mark McWatters, providing an opportunity to discuss the issues raised during the meeting and other concerns.

"We need to pay attention to what these rules mean to members of the credit union community, what is its impact, why the change is needed - and also look at what about the previous approach did not work," stated McWatters.

HCUA Hike the Hill attendees with Mark McWatters.

Anticipated  NCUA CAMEL Rating Changes

Following action on two items, approving a proposed rule on the Community Development Revolving Loan Fund (CDRLF) and an interim final rule on statutory inflation of civil money penalties, the NCUA Board heard details about upcoming changes to interest rate risk supervision and potentially adding an “S” to the CAMEL rating system. 

While there was not a vote at this time to officially add an “S” to the CAMEL rating system, it is anticipated it will be addressed in the future. According to NCUA staff, the purpose of the addition would be to “improve interest rate risk clarity and transparency.”   

NCUA created a working group last November that developed an interest rate risk (IRR) Supervisory Test.  This would establish four risk categories – low, medium, high and extreme. NCUA staff is in the process of training examiners on interest rate risk and including the approaches in the examiners guide. It is anticipated that NCUA may issue a Letter to Credit Unions by this August once the approaches are finalized for use by credit unions. 

While it was indicated by Chairman Rick Metsger that this would be a multi-year process, concurrent with the exam process restructuring, there were some concerns raised by McWatters about implementing these changes in advance of obtaining feedback from credit unions. Those concerns were also discussed during the HCUA meeting with McWatters following the board meeting.

Brad Douglas, HCUA president, speaks with McWatters.

HCUA will continue the dialogue with NCUA regarding this issue and keep member credit unions posted on developments and opportunities to provide feedback and input.

Here is a list of benefits and concerns with the CAMEL rating changes compiled by the Credit Union National Association. 


  • Shifts focus towards IRR outliers
  • Creates a uniform, measurable, consistent and transparent IRR measure
  • Increased clarity of supervisory expectations
  • Greater examiner consistency
  • Risk-focused discussions


  • “One-size-fits-all” approach
  • Uniform treatment of NMS values
  • Shock-test thresholds may supplant internal policy limits
  • Supervisory test may reduce scope and rigor of risk management programs
  • Shock test model will require adjustment over time
  • Bank supervisors have not adopted a standardized supervisory metric, as suggested in the NCUA proposal.