The NCUA issued a Letter to Credit Unions in October of last year that will be effective as of March 31, 2014 – are you ready? This rule applies to all federally insured credit unions (credit union) but does not include corporate credit unions. The NCUA’s goal in adopting the rule is to ensure all credit unions conduct sound liquidity planning.
What steps must your credit union take?
The rule requires a credit union with less than $50 million in assets to maintain a basic written policy which provides a credit union board-approved framework for managing liquidity and a list of contingent liquidity sources that can be employed under adverse circumstances. If a credit union has assets more than $50 million, but less than $250 million, the credit union must have a written liquidity policy and a contingency funding plan (CFP) which clearly sets out strategies for addressing liquidity shortfalls in emergency situations. Larger credit unions (those with $250 million or more in assets) must have a written liquidity policy, a contingency funding plan, and establish access to a backup federal liquidity source, either the Federal Reserve Discount Window (Discount Window) and/or the Central Liquidity Facility (CLF) for emergency situations. See NCUA Letter to Credit Unions 13-CU-10 (http://www.ncua.gov/Resources/Pages/LCU2013-10.aspx).