Tuesday, August 13, 2013

Emergency Liquidity, Central Liquidity Facility and FHLB Advances

Unless credit unions have made arrangements to access the Federal Reserve's Discount Window, a vast majority of credit unions do not have a source of emergency liquidity with the closure of U.S. Central Bridge FCU last year.

At the end of June 2013, there were 140 regular members of the Central Liquidity Facility. While this is up from 95 federally-insured credit unions as of December 9, 2011; the number still represents a miniscule 2 percent of all federally-insured credit unions.

Moreover, NCUA Chairman Debbie Matz during a July 18 Town Hall Meeting re-iterated the agency's position that it is highly unlikely that Federal Home Loan Bank advances will be treated as a source of emergency liquidity.

NCUA Chairman Matz said:
"We believe that the Federal Home Loan Banks are a great resource for credit unions for the purpose that they were intended, which is to provide liquidity to meet mortgage needs. Federal Home Loan Banks are not an emergency source of liquidity. And so when we do ultimately have a rule – and we do not have a timetable for that yet – we do not anticipate that they will be qualified as end-users for emergency liquidity."

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6 comments:

  1. AnonymousAugust 13, 2013 at 10:36 AM

    How can NCUA NOT have a timetable for a liquidity rule?
    If what you report is correct then thousands of credit unions do not have a liquidity source?
    IS THAT POSSIBLE?

    This can't be true.
    How many have access to Fed Window?

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  2. Keith LeggettAugust 13, 2013 at 10:50 AM

    As of March 2013, 458 credit unions have filed to borrow from their District Federal Reserve Bank. Source is Thomson Reuters.

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    1. AnonymousAugust 14, 2013 at 12:34 AM

      so as of march of this year, 598 credit unions can borrow in an emergency.
      out of 6888 total credit unions.
      roughly 6200 credit unions are without a liquidity backstop but ncya (yes ncYa) has no timetable for a liquidity plan.
      NICE!
      sounds like a public relations nightmare for credit unions and congress when rates go up.




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  3. AnonymousAugust 13, 2013 at 4:38 PM

    This should be a huge concern for everyone. Rates WILL go up, deposits WILL move to the places paying better rates, and for many, liquidity WILL be a problem. Nothing can put a bank or credit union out of business faster than a lack of liquidity. I see more assessments in the future.

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    1. AnonymousAugust 14, 2013 at 10:26 AM

      Agree. Many senior bankers know credit risk and over-expansion are history's two fatal errors before their 'uh-oh! moment' with a liquidity collapse. Better find that line of credit umbrella while the forecast is nothin but sunshine.

      The credit union merger registry 'aha!s' patiently await the 'uh-oh!s'.

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    2. AnonymousAugust 14, 2013 at 10:42 AM

      You're patiently waiting for merger?
      THAT'S laughable.
      A volunteer board, while quaint, does NOT serve the member's best interest.
      Hundreds of these credit unions of all sizes have thousands of members that would be better served in ALL ways by better run credit unions or community banks.
      The volunteer does not want to give up her cozy seat at the board table nor the cozy room at the cues conference.
      You think this liquidity catastrophe is going to be solved by merger before rates go up?
      Give me your number. I have some corporate credit union toxic bonds to sell you that the cooperative board missed in "oversite".
      Waiting for merger.
      Wait til you see the run on ANY credit union when the word gets out that A credit union could not meet a demand withdrawal.
      And, NCUA has no timetable.

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