NAFCU members detail challenges of rising interest rate environment

A third increase to the federal funds target rate is expected next month, and as credit unions adjust to this new environment they are facing increased levels of competition – especially in the area of member deposits. This month’s NAFCU Economic & CU Monitor – now available for download – details industry challenges relating to rising interest rates and liquidity needs.

More than 80 percent of credit union respondents to NAFCU’s Monitor survey indicated increased levels of competition over the past 12 months regarding member deposits. In an effort to be more competitive, roughly 45 percent of respondents have increased rates on share drafts or regular shares within the past three months. When asked about their savings rates relative to the competition, 36 percent of respondents said their rates are now either “somewhat” or “significantly” more competitive than they were last year.

Furthermore, some credit unions are exploring other sources of liquidity and making changes to their asset portfolios. Many credit union respondents identified Federal Home Loan Bank advances or other borrowing alternatives; others indicated that they are shortening their investment portfolio and ceasing to reinvest maturing securities. A smaller share of survey participants sold loans to provide for additional liquidity.


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