Commit to a long-term plan for excess liquidity

Non-703 investments can give your credit union a flexible income-management tool suited for an extended run of low interest and high liquidity.

Even if your credit union had a short-term plan for managing excess liquidity that built up in the early months of the coronavirus pandemic, it’s probably time to consider long-term strategies to bolster income as interest rates remain low.

Over the year ending in July 2020, the credit union industry’s savings balances increased 18.9%, while surplus funds rose 51.7% and assets grew 17.3%. “This is the fastest growth in credit union liquidity in over 30 years,” says Steven Rick, chief economist for CUESolutions Platinum provider CUNA Mutual Group, Madison, Wisconsin, in his September 2020 Credit Union Trends report.

Credit unions may be facing lower yield-on-assets for some time, with the Federal Reserve projecting the federal funds rate will remain at 0.1% through 2023.


continue reading »