By Cynthia Walker, CEO, Mark H. Smith, Inc.

Throughout life, there are many items at work and at home that need periodic maintenance and upkeep. Many years ago my husband and I had a home improvement task in our bathroom that we put off for many months. During this time we used another, less convenient bathroom in the house. When we finally got around to making the needed repairs, we commented on how simple the task turned out to be and marveled at the inconvenience we endured for way too long. After this experience we coined the phrase, “A 15-minute job that took us 6 months to complete.”

When it comes to reviewing and updating your ALM and IRR Policies, this too could be a relatively easy task that gets put off. The actual time it takes to read through the policy, make sure it still makes sense, that it matches the credit unions current practices, and the limits are still appropriate could take as little as 15 minutes. Setting this as a priority and getting everything pulled together to complete the task often gets postponed for months due to other demands on your time.

As we embark on a new year, I would encourage you to take the time and make it a priority to review your IRR Policy, update it if necessary, and then have the Board review and approve. An effective policy will address the means by which your credit union will manage interest rate risk within establish boundaries. It should include the following items1:

  • Accountable IRR oversight by board of directors and management
  • Appropriate IRR measurement and monitoring system
  • Good internal control
  • Informed decision-making based on IRR measurement system results
  • Provides additional considerations if you credit union is large, complex, or has a high-risk balance sheet

The regulators will review a credit union’s ALM Policy as part of their exam and will have criticisms when a policy is out of date or incorrect. The simple task of maintaining and keeping the IRR policy current could help avoid unnecessary criticism. We recommend your IRR policy be reviewed at least annually.

I periodically encounter clients that have outdated policies or they have not communicated their current policy limits to us at Mark H. Smith. It is very important the IRR policy limits and the ALMPro Report limits match. Index page 7 of your ALMPro Report details the limits being used in the report and also presents a date the last policy limits were communicated to us.

An updated policy and correct limits in the ALMPro Report fall into one of the areas needing periodic upkeep. We strive to be a valuable resource to our clients in the area if ALM and Interest Rate Risk. We are available to assist with your policy, discuss policy limits, incorporate the limits into your ALMPro Report, and participate in your ALCO or Board meetings as needed. Don’t take 6 months to get it completed, make a 15-minute phone call. If you would like assistance, please contact to schedule a time to meet.


1. Letters to Credit Unions: 12-CU-05 Interest Rate Risk Policy and Program Requirements, May 2012