Agency warns credit unions of ‘growing liquidity stresses;’ offers areas to monitor

“Growing liquidity stresses” within the credit union system have prompted an “advisory” from the institutions’ federal regulator issued Wednesday, urging credit unions to engage in liquidity management conducted with “necessary frequency.”

In its advisory, the National Credit Union Administration (NCUA), sent to all federally insured credit unions, the agency acknowledged that recent credit union financial performance has been “stable and resilient overall.” However, the agency indicated that some credit unions are experiencing lower share growth, high loan growth, and declining levels of available liquidity as a result.

Because of that, the agency said, liquidity management needs to be “conducted with the necessary frequency and sophistication of methods used, closely monitored by the credit union’s senior management, and one of the board of directors’ top areas over which to provide good governance.”

The advisory outlines several areas for credit unions to monitor, including:

  • Management and forecasting of cash flows;
  • Control of asset composition;
  • Structuring of liabilities to be congruent with asset growth;
  • Developing governance and monitoring structures suitable for the credit union’s size, complexity, and financial condition;
  • Maintaining diversified liquidity sources that can be accessed in various situations.

The agency said it would continue to ensure credit unions conduct liquidity and asset-liability management planning to address current challenges and future uncertainties.

Liquidity Risk Resources