By Ray Birch
LIBERTY LAKE, Wash.—As much as $30 million may have been distributed on Monday alone by financial institutions across this state as consumers withdrew large sums of cash in large part due to fears around the coronavirus pandemic.
That’s the estimate of Ezra Eckhardt, CEO of the $3.3-billion Spokane Teachers CU, whose credit union was among the institutions that had members or customers lining up to withdraw funds.
The run on deposits, both at ATMs and inside some institutions, emphasize the need for credit unions to communicate clearly with members during the pandemic that money will always be easily available through digital channels, sources told CUToday.info.
The withdrawals, often at the CU’s $10,000 limit, were the result of consumers’ fears over the coronavirus pandemic by those worried they will have to have cash on hand, said Eckhardt.
“Following the state closing all schools on Friday, there was a blast of pandemonium Monday,” Eckhardt said. “That generated more concern from people over the impact of the coronavirus. (It) created a bit if a stir.”
That news, Eckhardt said, set off a “ripple effect” of people rushing out to get food and supplies, and money from their financial institutions.
“We saw this happening among all financial institutions,” said Eckhardt. “It occurred at banks of all sizes and at credit unions.”
Right Up to the Limit
Eckhardt said many of the withdrawals from his credit union were for the $10,000, one-day limit. He noted some banks had higher limits, as large as $50,000, and many customers at those institutions were making withdrawals right up to that threshold.
“If I had to do some quick math on a sticky note,” said Eckhardt, noting he spoke with many banks and CUs across the state of Washington this week, “I’d guess we all put $20-$30 million in cash on the streets.”
Eckhardt added some of the increased transaction activity was due to Friday being a payday and consumers taking out tax refund money, as well.
“But this was certainly a significant amount of cash we all handed out and it was not an isolated incident,” Eckhardt said.
Members had calmed down by Wednesday, said Eckhardt.
“And in my conversations with other financial institutions, that was the case across the state,” said Eckhardt.
Ezra Eckhardt
The CEO emphasized STCU members were not withdrawing money due to safety and soundness concerns of the credit union itself.
“It really does not make a great deal of sense, but it happened,” said Eckhardt. “I mean, everything in this state is closing down. Where are people going to spend cash? Plus, cash can transmit diseases.”
Policy Changes
Following Monday, STCU lowered its daily cash withdrawal limit.
“Pretty quickly we all moved to lower limits,” said Eckhardt. “We moved to $1,500-a-day limit. If members need more, we want to serve their needs, and we moved to five-day large order limits through the Fed.”
STCU did not see coming the demand for making so many withdrawals coming, acknowledged Eckhardt.
“We definitely didn't suspect this. But in our normal operating parameters we have pretty good cash modeling and we have contingency plans set up for daily emergency cash transfers,” he said.
Eckhardt said he does not believe the pattern is going to repeat itself, despite the ongoing pandemic, which has hit Washington hard.
“We have not changed any of our daily business practices,” he said. “We did fully replenish our daily operating cash, and we are stocking our central cash vault a little bit higher than normal.”
Eckhardt emphasized during the pandemic credit unions should step up communication with members, particularly in reminding them they always have access to their money.
“Let members know all the electronic systems work, all the payment channels work…,” he said.
Communications 101
Member communications, during the pandemic, should be a high CU priority, agreed Troy Stang, president and CEO of the Northwest CU Association.
Troy Stang
“We've got to go back to communications 101—Your money is safe and sound. Your money is in a regulated financial institution backed by the NCUSIF. Credit unions are better capitalized now than they ever were…,” said Stang. “We need to brush off all those old things we haven't talked about for a while, and we have to sharpen our saws as a credit union movement—talking about the basics to help educate our members.”
Stang, who is also chair of CUNA, said credit unions need to communicate not only with members, but with the communities they serve.
“That includes the local media,” said Stang, adding some media outlets in Washington could have been “more careful” about what they reported regarding the pandemic, and possibley contributed to Monday’s run on money.
“I think right now credit unions should be more proactive in their outreach to the media,” said Stang, adding that his league is taking that step, along with other leagues across the country.