FREDERICK, Md.-COMSTAR FCU is prepared for the Sept. 30 interest rate risk management policy deadline, as well as for a quick, sharp rise in rates.

CEO Vicki Johnston said the $230-million institution has had a comprehensive interest rate risk policy for many years. "For us, the deadline does not mean anything. We are ready now. We created a policy years ago, identified what interest rate risk we had, measure and monitor it regularly, and have controls in place if we reach a policy trigger with action steps to follow."

Part of that plan has been to rate shock quarterly.

"We have been shocking the balance sheet by 400 to 500 basis points for years. We are ready if the long end of the curve goes up faster than the short end and vice versa. Plus, our balance sheet is very conservative and we have not given in to the temptation to reach for yield. We have a good mix of variable and fixed rate products to help us weather any storm."

Aside from the September deadline, Johnston cautioned that credit unions must be prepared for rates to rise quickly to prevent a steep outflow of deposits to money market funds and banks, which typically adjust rates faster than CUs. Johnston said her credit union will be poised to raise rates when the time comes. "If rates go up, it could mean cost of funds could go up and liquidity could be an issue if members decide they don't want to keep their deposits here. If a credit union lags behind, they will likely pay a price."

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