Insights from Catalyst

Is liquidity tight and loan demand strong at your credit union? In the past, you’ve likely looked at selling loan participations to ease liquidity and create balance sheet capacity for continued loan demand. However, as interest rates rose, you may have been hesitant to enter into a loan participation sale due to potential pricing below par. But with the potential for falling interest rates ahead, are there reasons to revisit this decision?

With total loans/shares on the rise and interest rates uncertain, liquidity management can be challenging. Squaring away available funding sources and stress testing your credit union's liquidity are two essential components of effective liquidity risk management.

2018 was another stellar year for the credit union industry. While credit unions are doing well overall, some are facing challenges. Heading into 2019, a key concern for many credit union balance sheets is maintaining liquidity.

Most credit unions have approached increasing deposit rates with a wait-and-see attitude, resulting in below-market rates for as long as possible. The wait may be over as a result of tightening liquidity.

In 2005, interest rate derivative and bond traders wanted more volatility in the rates markets. Interest rate volatility markets were all but dead, and traders complained about being bored. They had a point, and to be fair, traders need some volatility to make money.