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Mitigate Your Credit Union’s Liquidity Crunch



By John Flynn, CEO, Open Lending


CUNA recently held its 2019 Finance Council Conference, and the CFOs there named liquidity as their top concern. That’s wise.


The financial officers discussed all areas of liquidity management, according to CUNA, and ways to avoid getting caught in a bind. Some suggestions attendees shared included promoting well-paying CDs and reverse money market accounts, offering emergency savings accounts that pay higher rates on the first $2,000 and adding rewards to checking accounts.

Not surprisingly, liquidity is what NCUA examiners are interested in as regulators and stewards of the National Credit Union Share Insurance Fund. The agency is really looking at this issue this year as we prepare for a possible recession with the 2008 economic crisis looming in the back of everyone’s minds.


The NCUA’s liquidity requirements and contingency planning are found in §741.12(a), §741.12(b), §741.12(c), and 702.504(b)(5), and basically include:

Frank Santucci, managing director of Stifel Financial Corp told CUNA’s Financial Council Conference that asset-liability management begins and ends with liquidity, and it reaches into various areas of enterprise risk management, including the highly critical risk to an institution’s – or even an entire sector’s – reputation. He recommended that credit unions join the Federal Home Loan Bank and Federal Reserve Bank, which as a former credit union CEO I’d say is good, common sense. Santucci also pointed out that participations can be an efficient source of liquidity because, generally speaking, the member pays the loan back.


Another way to help shore up your liquidity is a different type of contingency planning: default insurance. Open Lending’s Lenders Protection is a risk management tool that helps protect credit unions’, and therefore members’, hard-earned money. By insuring against default on non-prime loans, credit unions are able to make more loans that are higher yielding, generating better cashflow for the institution, and creates financial and operational efficiencies by taking advantage of loan applications that are already coming in but fall outside of your credit union’s standard underwriting guidelines.


By making more loans to more borrowers in need and boosting ROI while also mitigating the risk of default that further pinches liquidity, you can be your members’ hero, your dealerships’ savior and your credit union’s crown guardian angel.