Policies and procedures reflect a board of directors’ risk appetite and provide clear designations of authorities, limits, and responsibilities. Policies establish risk-taking authority and set limits that are consistent with the credit union’s business strategy, level of complexity, liquidity risk profile, and the level of expertise of credit union personnel. Risk reports provide a clear understanding of the institution's liquidity risk exposure, the level of compliance with risk limits, show consistency between management's strategies and tactics, and the board of director's expressed risk tolerance.
Prerequisites
Perform an initial assessment of liquidity before completing this exam step.
People to Interview
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President/Manager
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Chief Financial Officer
Documents to Review
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Liquidity Policies/Procedures
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CFP
Questions to Consider
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Do policies specify the required frequency of management reporting?
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Are cash flow mismatches or gaps limited over specified future time horizons under both expected and adverse business conditions?
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Are asset concentration percentages for various asset classes reasonable?
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Do policies address and define the maximum level of volatile funding sources allowed to be utilized?
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Are policy limits defined and reported?
Last updated August 30, 2021
