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3 tips to prepare for this summer’s liquidity season

Perry Jones
By Perry Jones, VP/Portfolio Manager

May 24, 2016 -- With summer right around the corner, monitoring your liquidity position may become a higher priority within your organization. The following three tips will help your credit union ensure the health of your balance sheets.

  1. Monitor your liquidity position. Organizations that operate with lower levels of on-balance-sheet funding may perform monitoring on an hourly basis. Other organizations may be in a position to monitor liquidity on a daily, weekly or monthly basis. Generally, the first tool for monitoring your liquidity position will be your primary settlement account (The One Account) at Corporate One.

    Through our online account management system, Member$mart, you can monitor your intraday or end-of-day liquidity position. This system will also allow you to access loans on demand through your credit line.
  2. Test your sources of external funding. Such testing is an important component to ensure liquidity plans and policies remain up to date. Our internal and external environments are constantly evolving with changes in people and systems. Benefits from periodically testing your sources of liquidity include the following:
    1. You can demonstrate that the right people are authorized and that those folks maintain both access and the procedures required to borrow and transfer funds where needed.
    2. You can 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.
  3. Perform regular maintenance. Maintenance is highly correlated with testing, as needed policy and plan updates will be uncovered through the testing process. However, maintenance may also involve positioning, monitoring and maintaining sufficient collateral with each lender to support issued lines.

    Other important aspects of maintenance would be to ensure 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 evolving business strategies.

Helping our members with liquidity solutions

Corporate One is well positioned to help your credit union meet strategic objectives with customized funding solutions. We have robust access to external liquidity, including primary credit status with the Federal Reserve Bank, a strong on-balance sheet liquidity position, large deposit base, top-tier capital position, and high-quality investment holdings. We also prudently limit the extension of lines of credit to ensure we meet our off-balance-sheet commitments, and we are one of just a few corporates that do not require a capital investment to use our funding solutions.

As we continue to expand our funding solutions suite of products while serving the current needs of Partner and Associate members, we want to remind you that we offer:

  • Traditional credit lines
  • Expanded borrowing capacity to Partner members
  • Non-member deposit services
  • Investment brokerage
  • Loan participation services

In addition, our term-loan products include competitively priced intra-month funding to multi-year terms, amortizing loans and floating-rate advances. And, you can add options to these products to further mitigate risk, such as interest rate caps.

Essentially, we work to serve your specific needs.

If you would like to discuss your liquidity options with Corporate One, please contact me directly at 800/342-0203, ext. 4030, or call one of our senior investment services representatives at 800/366-2677.