In the last few years, several CUs collapsed much faster than the NCUA thought possible and the agency learned a painful lesson. The boards at those CUs hadn’t really understood the kinds of risk their CUs had assumed or how those risks, given the right conditions, could impact multiple facets of the CUs’ operations simultaneously.

And now, board directors, they’re coming after you.

The potential for risks to aggregate and threaten a CU with a quick demise is called concentration risk and the NCUA is demanding that boards understand and manage it.

The agency formally announced its new demand with a supervisory letter on concentration risk last March. As the letter makes clear, CUs need to show that they’re identifying and planning for concentration risk – a task that, if done the way the agency wants, will rearrange the way a CU operates and conducts strategic planning. The letter also assigns the “ultimate responsibility” for this new risk management scheme. Board members: It’s all on you.

The NCUA wants directors not only to understand, but also to direct their CU’s concentration risk operations. Directors will need to set policy – including calibrating new risk levels for all CU operations – and weigh ongoing CU decisions against the risk levels they set. The NCUA is asking for a high level of sophistication from volunteer board members, but the agency won’t countenance a board that delegates its concentration risk responsibilities away.

“The board of directors and management should have triggers and action plans in writing for any material risk area,” the NCUA demands. With this book, you’ll find everything you need to get started on those plans.

Concentration Risk: A Guide for Directors offers a practical guide to concentration risk. This material details not only what the NCUA wants from management and directors when it comes to concentration risk, but also how you can build a concentration risk policy and practice that benefits your CU.

In this book you’ll get to read up on examples of CUs stung by examiners and by markets for their failure to plan for concentration risk. You’ll also get broad, general discussions of concentration risk policy with step-by-step guides to creating a solid policy. We’ve also included documents and guidance from the NCUA and the FFIEC, as well as case studies from CUs already working on advanced risk mitigation programs.