This chapter provides examiners with a broad understanding of the relevant factors affecting a credit union’s liquidity risk, given its balance sheet structure and current risk management practices. Effective credit union management identifies, measures, monitors, and controls exposure to liquidity risk in a timely, comprehensive manner. This chapter also provides examination procedures and ratio definitions to assist examiners in assigning a liquidity risk rating.

Liquidity is defined as a credit union’s capacity to meet its cash and collateral obligations at a reasonable cost. Maintaining an adequate level of liquidity depends on a credit union’s ability to efficiently meet both expected and unexpected cash flows and collateral needs without adversely affecting the credit union’s daily operations or financial condition.

This chapter of the Examiner’s Guide addresses the following:

Last updated April 29, 2022