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From the CEO: Be Prepared

August 20, 2014

Dear members:

No need to sound the alarm bells and no need to panic, but it is time to be prepared for the need for liquidity; and that means having a written plan. We at Corporate One have found an excellent reference provided by all the federal banking agencies who have issued guidance to provide sound practices for both managing funding and liquidity risk and for strengthening liquidity risk management practices. You can find the link to this guidance at the FDIC’s Web site, and we encourage you to use this information as an outline to assist in your overall planning. The solution is not simply just being able to access the Federal Reserve or the FHLB, but is about simply being forward thinking. I want to take this opportunity to review some of the many common sense ways to prepare, and how we stand ready to assist you as you manage through the changing environment that higher deposit and market rates will create.

With liquidity risk as one of the primary regulatory concerns for 2014, we have helped a number of credit unions shore up their liquidity plans and policies in the first half of 2014. The focus has been on satisfying the three primary tenets of a sound liquidity plan, which include maintaining sufficient on-balance-sheet liquidity, establishing adequate levels of external funding, and seeking contingency Federal funding solutions, if desired or required. Going forward, monitoring, testing and maintaining the liquidity plans will be instrumental to managing and demonstrating the sound liquidity posture of your organization.

Liquidity Monitoring

With the summer months upon us, monitoring your liquidity position may become a higher priority within your organization. Within organizations that operate with lower levels of on-balance-sheet funding, monitoring could be done on an hourly basis, whereas other organizations may be in a position to monitor liquidity on a weekly or monthly basis. Generally, the first tool for monitoring your liquidity position will be your primary settlement account at Corporate One. Through our online account management system, Member$MART, you can monitor your intraday liquidity position, and this system will also allow you to access liquidity on demand through your line of credit. Here is a new idea, as your deposit base and liquidity will be critical to your profitability, and depending on your needs, perhaps create a business owner who is responsible for leading and coordinating all your efforts surrounding liquidity and funding. You have a Chief Lending Officer, is it time now for a Chief Funding Officer?

Liquidity Testing

Testing your sources of external funding is an important component of ensuring that liquidity plans and policies remain up to date. Our internal and external environments are constantly evolving with changes in people and systems. By periodically testing sources of liquidity, you can demonstrate the procedures necessary to borrow and move funds, and ensure that the right people are authorized and can gain access to your liquidity sources when needed.

Another important benefit of liquidity testing is to help minimize operational risk during periods of financial stress or other crises. For many organizations that do not access external funding periodically, when the need does occur this may be due to unforeseen events that create significant pressure on the resources of the organization. This is not the time to be forced to update passwords, authorities, or even procedures. With regular testing, you will be confident in your process during these critical times. For those of you responsible for managing this process, you should “Trust but Verify.”


Maintenance is highly correlated with testing as needed updates will occur through the testing process. However, maintenance may also involve positioning, monitoring and maintaining sufficient collateral with each lender to support issued lines. Another important aspect of maintenance is to assure that the organization maintains sufficient access to external funding as growth occurs, business strategies evolve or conditions change with the composition of existing liabilities. These ongoing activities are essential to being prepared when liquidity tightens or when State or Federal examiners become interested in your plan. Liquidity and Funding will require more focus and attention and it may well be time to shore up and firm up the responsibilities for these activities.

In closing, Corporate One remains committed to being your preferred liquidity provider and providing solutions that best serve your individual credit union’s needs. If we can help you test your liquidity or help with funding solutions please contact our very helpful Member Services Representatives or if you would like to discuss your sources of liquidity or Corporate One’s liquidity offerings, please contact your Senior Investment Representative. All can be reached at 866/MyCorp1. Also feel free to reach out to our VP of Lending, Perry Jones at ext. 4030. He can assist you with any questions about liquidity planning, policies or emergency liquidity options.

Lee Butke can be reached at or at 614/825-9300.

Lee C. Butke