Asset and liability management.

CFR · 2024-01-01 · US · Title 12

(a) (1) The purpose and objectives of the corporate credit union's asset and liability activities; (2) The maximum allowable percentage decline in net economic value (NEV), compared to base case NEV; (3) The minimum allowable NEV ratio; (4) Policy limits and specific test parameters for the NEV sensitivity analysis requirements set forth in paragraphs (d), (e), and (f) of this section; (5) The modeling of indexes that serve as references in financial instrument coupon formulas; and (6) The tests that will be used, prior to purchase, to estimate the impact of investments on the percentage decline in NEV compared to base case NEV. The most recent NEV analysis, as determined under paragraph (d)(1)(i) of this section may be used as a basis of estimation. (b) (c) (d) (i) Evaluate the risk in its balance sheet by measuring, at least quarterly, including once on the last day of the calendar quarter, the impact of an instantaneous, permanent, and parallel shock in the yield curve of plus and minus 100, 200, and 300 BP on its NEV and NEV ratio. If the base case NEV ratio falls below 3 percent at the last testing date, these tests must be calculated at least monthly, including once on the last day of the month, until the base case NEV ratio again exceeds 3 percent; (ii) Limit its risk exposure to levels that do not result in a base case NEV ratio or any NEV ratio resulting from the tests set forth in paragraph (d)(1)(i) of this section below 2 percent; and (iii) Limit its risk exposure

official document · source cfr-2024 · id 12:§ 704.8