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NCUA, federal agencies update guidance on liquidity risks, contingency planning
Last week, the NCUA and other financial institution regulatory agencies updated their guidance on liquidity risks and contingency planning. Their recommendation highlights financial services institutions should regularly evaluate and update their contingency funding plans.
“The events of the first half of 2023 have further underscored the importance of liquidity risk management and contingency funding planning,” NCUA Chairman Todd Harper said in a Letter to Credit Unions. “The level and speed of deposit outflows at a few firms was unprecedented and contributed to acute liquidity and funding strain at those institutions. These events are a reminder to depository institutions that depositor behavior and broader market conditions can evolve over time, and sometimes without warning.”
Of note, the guidance encourages the incorporation of a discount window as a contingent liquidity source, and advises credit unions with access to “establish and maintain operational readiness to use the discount window which includes periodic transactions.” The guidance also advises credit unions to “review and revise contingency funding plans periodically and more frequently as market conditions and strategic initiatives change.”
NAFCU will continue to provide updates on changes from the NCUA and other regulatory agencies through NAFCU Today.