Are you liquid enough?

Greetings Compliance Friends!

One of NCUA’s primary areas of supervisory focus for 2019 is to examine for liquidity risk, and in particular “credit union management’s ability to meet liquidity needs given the increased competitive pressures that affect share balances.” See, Letter to Credit Unions 19-CU-01. While the NAFCU Compliance Team does not address liquidity risk very often, NCUA does provide some guidance that credit unions may find helpful to better understand NCUA’s expectations.

Liquidity describes a credit union’s ability to meet its expected and unexpected cash and collateral obligations without an adverse effect on daily operations. A credit union’s liquidity risk is increased when assets cannot be quickly turned into cash to make loans or pay expenses. NCUA’s Examiner’s Guide provides three categories which demonstrate possible liquidity scenarios:


continue reading »