Insights from Catalyst

The current pandemic crisis will continue to generate contrasting scenarios for the year ahead, requiring a more robust liquidity and interest rate risk management process – one that now accounts for the best but prepares for the worst. Now more than ever, it’s important that credit unions examine their balance sheet from every angle to ensure they’re effectively managing their liquidity needs.

A $2 trillion stimulus measure, approved by Congress and signed by President Trump on March 27, aims to relieve the severe economic agony brought on by the COVID-19 pandemic. The stimulus will sweep broadly across the U.S. economy, reaching nearly every segment, but how it will affect credit unions may vary widely – based on their differing memberships. However, nearly all credit unions should be thinking about some general considerations during these unprecedented times.

The coronavirus has continued its ominous march across the planet. Pandemic contingency plans have been activated, while schools have been closed. The cancellation of numerous sporting and social events have caused sadness and store shelves are bare. And the word “historic” keeps showing up alongside news about the economy – as in, “historic stock market declines” and “historic lows for the 10-year Treasury.”

Since the announcement that the London Interbank Offered Rate (LIBOR) would be phased out at the end of 2021, many new developments have occurred. The main development has been the Alternative Reference Rate Committee (ARRC) replacing the U.S. dollar LIBOR with the Secured Overnight Financing Rate (SOFR). Other developments have included increased SOFR-based issuances, standardized fallback language and the development of a SOFR term structure.

The effective date for the new Current Expected Credit Loss accounting standard, or CECL, has been extended, so now what?