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CUs Prepare for New Liquidity Regulations
Tuesday, February 11, 2014 6:25 AM

Why is there a new liquidity rule? If a credit union’s liquidity plan is embedded in its investment policy, will the credit union still need to draft a new policy? These are just two of many questions posed during the Catalyst Strategic Solutions’ webinar, “Liquidity Planning: Preparing for the New Regulation,” attended by 210 credit union professionals late last month.

The new Liquidity and Contingency Funding Plans regulation takes effect on March 31, 2014, and credit unions are preparing now for the changes it will bring. During the one hour webinar, Catalyst Strategic Solutions experts reviewed details of the regulation and provided credit unions with specific policy considerations and a detailed description of processes for accessing the Discount Window and Central Liquidity Facility – the only two emergency liquidity sources approved by the NCUA.

As explained by Jeremy Blair, senior advisor for Catalyst Strategic Solutions, some 6,000 natural person credit unions lost access to the CLF for contingency liquidity after the wind-down of U.S. Central.  Many of those credit unions have not yet taken action to restore that coverage.

“The financial crisis of the last five years demonstrated the importance of a strong liquidity position and the effects a rapid and extended depletion of liquidity can have on a financial institution. The new rule was designed to restore liquidity access to individual credit unions and to the industry at large,” said Blair.

Credit union staffers who attended the webinar also expressed concern regarding the need to draft new ALM or investment policies to reflect the new regulations.  According to Blair, “Credit unions can keep their liquidity plan embedded in their ALM or investment policy.  However, it is most likely that current credit union liquidity plans may come up a bit short in light of the new regulation requirements.  Credit unions may have to expand their policies a fair amount and are encouraged to revisit and take a good hard look at them.”

The webinar highlighted the rules by asset size and layers of protection and presented measuring and monitoring metrics, along with sample scenarios.  “A contingency funding plan should establish clear strategies for addressing unexpected cash flow shortfalls in various deteriorating liquidity stressed scenarios,” suggested Steven Houle, director of Catalyst Strategic Solutions’ Advisory Service. The webinar provided tips on what a credit union’s contingency funding plan should include, as well as ways to identify plausible liquidity stress events and assess asset liquidity.  

To listen to the entire webinar, visit online at