MADISON, Wis.—The Wisconsin Office of Credit Unions has notified the state’s CUs it plans to pay more attention to credit unions' liquidity management.
The state regulator noted the loan-to-share ratio for Wisconsin credit unions was 97.16% at the end of the third quarter of 2018, which 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,” said Keith Leggett, the former senior vice president and senior economist at the ABA, who first reported the increased scrutiny on his blog.
Among the issues to be getting the increased attention by state examiners will be 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,” Leggett suggested.