Wednesday, January 2, 2019

Wisconsin CUs Need to Proactively Manage Liquidity Risk, Says Regulator

The Wisconsin Office of Credit Unions wrote Wisconsin credit unions in December that it will heighten its analysis of credit unions' liquidity management.

The state regulator noted that the loan-to-share (deposit) ratio for Wisconsin credit unions was 97.16 percent at the end of the third quarter of 2018.

The letter stated that the increase in loans has stressed liquidity for many credit unions.

Credit unions were advised that examiners will expand their analysis of credit unions with low levels of liquidity. This analysis will include looking at how a credit union measures, monitors, and manages liquidity and liquidity risk.

Things examiners will look at include balance sheet composition, funding sources and the reliance on borrowed money and nonmember deposits, projections on asset and loan growth for 2019, liquidity policy and contingent funding, and communication of liquidity events to senior management and directors.

While the state regulator acknowledges that there is not a one-size fits all approach to managing liquidity risk, it expected that credit unions to document their practices to ensure that liquidity levels are within established limits and that management and staff are proactively managing liquidity.

Read the letter.

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