Model Assumptions

Measurement systems should effectively process several data elements for IRR, including, but not limited to:

• Projected balance sheet volumes

• Prepayment rates for loans and investment securities

• Repricing sensitivity

• Decay and beta rates of NMS

• Projected interest rates

• Discount versus offering rates relationships

NMS decay rates and repricing sensitivity (RSFs or Beta) are commonly the most difficult assumptions that management makes when measuring IRR exposure. These assumptions are critical, particularly in market environments in which member behaviors may not reflect long-term economic fundamentals, or in which credit unions are subject to more competition for such deposits.

Last updated on December 06, 2024