Credit Unions and Capital Adequacy: Managing Growth and Risk

R. Raymond Sant and Regina W. Schroeder
Additional contact information
R. Raymond Sant: Associate professor of Finance,School of Management and Business, St. Edward’s University, Austin, TX

International Journal of Business and Social Research, 2012, vol. 2, issue 6, 241-255

Abstract: In this paper we argue that a financial institution needs to continuously monitor and assess its risk exposure in the context of capital requirements and available growth opportunities. Judicious management of the interaction between these three elements is crucial to the long term survival and growth of such an institution. We highlight different approaches to risk analysis, beyond stress testing, such as, Value at Risk and Monte Carlo simulation. We recommend that the board of directors establish a sub-committee of its directors to oversee risk management and capital control functions, and to monitor a credit union’s asset liability management activities on an ongoing basis. Efforts should also be made to increase the level of internal expertise regarding risk management and analysis with the full participation of the board, a function that should not be outsourced. In an increasingly regulated financial industry environment it is imperative that a financial institution seeks out growth opportunities while maintaining the balance between capital and risk exposure for long-term business continuity.

Keywords: Credit Unions; Risk Management; Stress Testing; Monte Carlo Simulations; Value at Risk; Capital Adequacy; Growth; Basel Accord (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://thejournalofbusiness.org/index.php/site/article/view/148/147 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mir:mirbus:v:2:y:2012:i:6:p:241-255

Access Statistics for this article

More articles in International Journal of Business and Social Research from MIR Center for Socio-Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by M Kabir ().