C. Myblog

An Approach to Monitoring Liquidity

July 9, 2015

Loan growth in the credit union industry was in double-digits as of first quarter 2015.  While this is a welcome change from the flat to negative growth experienced in 2010, it can put a squeeze on liquidity if not monitored appropriately.  Liquidity monitoring and measuring is a big focus for credit unions and for examiners.  Liquidity analysis should include not just the credit union’s expected liquidity path, but also stress events and potential solutions to those events, should they occur.  Some credit unions find this a daunting task.  Here’s a suggested process to help get your credit union going:

  • Start with your plan/forecast
  • Develop a list of liquidity concerns
  • Survey key members of the organization to rank liquidity exposures
  • Create a story that captures the main exposures
  • Walk through the story and quantify potential exposure
  • Role play how the institution could respond
  • Uncover weaknesses/questions
  • Create action items to address weaknesses/questions

By walking through this process, your credit union will undoubtedly begin to think about its unique liquidity position differently.  Many credit unions uncover action items that can be implemented today to better prepare them for an unexpected future threat to liquidity.

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