A credit union establishes a funding strategy that provides effective diversification in the sources of funding that is diversified across both member-based and wholesale sources of funds, consistent with the credit union’s size, business strategy, and complexity. A prudent credit union has a regular process to evaluate its capacity to raise funds quickly from each source and identifies the main factors that affect its ability to raise funds and monitor those factors closely to validate estimates of fund raising capacity. Sources are diversified by term, secured and unsecured, and by different types of collateral requirements and types of creditors.
Prerequisites
An initial assessment of liquidity would be needed 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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Balance sheet
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Stress tests
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List of external funding sources
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Proof of testing external funding sources
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Liquidity Policy
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CFP
Questions to Consider
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Does the FICU rely on too few sources of external funding?
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Do liquidity stress tests include effects of reduced availability to external funding?
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Are all external funding sources tested annually for continued access and pricing?
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Does the credit union have a concentration of large or non-insured share deposits or certificates? Are these depositors identified by amounts and maturities?
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Has management modeled an impaired access for each of its contingent sources of funding and incorporated such sensitivity analysis into its stress tests?
Last updated August 26, 2018
