RALEIGH, N.C., Oct. 24, 2014 (GLOBE NEWSWIRE) -- With new complex "Stress Tests" on the horizon for credit unions, State Employees' Credit Union has added another independent, external validation component to its longstanding practice of closely monitoring capital levels at the $29 billion not-for-profit cooperative.
Stress testing is a forecasting tool, using quantitative analysis and "what if" scenarios, to evaluate whether a financial institution is holding sufficient capital to survive adverse economic events. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires large, for-profit financial institutions with more than $10 billion in assets to conduct annual stress tests. Although credit unions were specifically omitted from the Dodd Frank legislation, the National Credit Union Administration (NCUA) Board has determined that large, federally-insured credit unions must also undergo the stress testing process. SECU, a long-time proponent of risk-based analyses of capital adequacy, has been using the Federal Reserve bank stress requirements already in place to benchmark and simulate potential SECU balance sheet changes.
SECU's internal simulations, using those Federal Reserve 2013 scenarios produced highly positive results. SECU recently enlisted the assistance of the international consulting firm of KPMG to conduct a formal, independent assessment of the Credit Union's stress test capital evaluations. KPMG's assessment found SECU's stress test methodology to be "sound and reasonable" and which "complies with Federal Reserve Board requirements."
SECU Chief Financial Officer Mike Lord comments, "Large banks are required to conduct "Stress Tests" on their capital levels through "adverse" and "severely adverse" economic environments to demonstrate that they can always maintain safe and sound operations. We are pleased that KPMG's assessment results reflect that SECU is strongly capitalized and well able to withstand the financial stress of "severely adverse" economic environments. SECU and our member-owners have actually experienced extremely severe economic conditions over the past five years, resulting from high unemployment rates, declines in housing values and slow growth in wages. Successfully withstanding such a real-life, volatile economic environment speaks volumes about SECU's capital adequacy and the strength and resiliency of the cooperative financial model. It is great to have KPMG help confirm and validate SECU's approach to capital strength, safety and soundness."
"Under NCUA's current net worth requirements at September 30, 2014, SECU is well-capitalized with a leverage ratio of 7.74% and has a 15.72% well-capitalized ratio under the newly proposed NCUA risk-based capital standards. If SECU were subject to bank BASEL I requirements, its well-capitalized ratio would be 19.46% and under current bank FDIC/BASEL III capital requirements SECU would enjoy a 12.84% well-capitalized ratio."
About SECU
A not-for-profit financial cooperative owned by its members, SECU has been providing employees of the State of North Carolina and their families with consumer financial services for 77 years. With more than 1.9 million members, SECU provides services through 254 branch offices, 1,100 ATMs, 24/7 Contact Centers and a website, www.ncsecu.org.