ALM model assumptions preloaded by 3rd parties tend to be wrong. How does the Division of Credit Unions view this?
Pre-loaded assumptions do not take into consideration the characteristics that are inherent in your credit union; such as how dedicated your member’s are to depositing money at your credit union. Also, it is important that the ALM model assumptions correctly reflect the “optionality” in your credit union’s balance sheet.” Regulatory agencies believe it is the credit union’s responsibility to set the ALM model assumptions. If running the model and inputting the data and assumptions is performed by an independent third party, then it is management’s responsibility to make sure the ALM consultant receives the data and assumptions, which reflects your credit union’s activities, strategies and inherent characteristics.
