Why Are Credit Unions Being Ask To Test Their Concentration Risk Policy Now?
Just a few years ago, as I toured the credit union conference circuit discussing loan portfolio risk, I was often asked about Risk Concentrations. Specifically, many would ask me if there were some best practices that I could share with them related to what their concentration thresholds should be. I would explain that the practice of setting concentration risk thresholds was not about finding the magic threshold that examiners were seeking, but actually going through the process of measuring risk and determining the level of risk the credit union could live with. The initial NCUA guidance was provided to credit unions in 2010 and over the subsequent years, credit unions began to solidify their concentration risk polices. Little more has been said on this topic, until recently. Like many risk advisories from regulators, there is a tendency to focus on the issues for some time and then move to the next issue as concerns shift. The mistake that credit union leaders can