Friday, March 30, 2018 9:00 AM

Credit union loan growth has outpaced savings growth for the past five years, and current loan demand at credit unions continues to be strong. Many credit unions are operating with high loan-to-savings ratios and their liquidity positions will likely tighten further this year. Now is a good time for operating management and the board of directors to review their liquidity outlook, asset liability management practices and Liquidity Contingency Funding Plan (CFP) to ensure that adequate liquidity will be available to meet member loan demand and share withdrawal requests. Rising market interest rates could increase savings deposit outflows to money market mutual funds and other higher yielding accounts, which could lead to liquidity strains for some credit unions.

A CFP is required for federally insured credit unions as a condition of federal insurance [12 CFR §701.31(d)(2)]. Each credit union should assess their current CFP to ensure it addresses the following:

  1. Policies to manage a range of stress environments, identification of some possible stress events, and identification of likely liquidity responses to such events;
  2. Lines of responsibility within the credit union to respond to liquidity events;
  3. Management processes that include clear implementation and escalation procedures for liquidity events;
  4. Outside sources of liquidity for contingency needs; and,
  5. The frequency the credit union will test and update the plan.

Source:  Texas Credit Union Department