Vice President, ALM Services,
Catalyst Strategic Solutions
Stress. It’s just one syllable, but it could have a disastrous effect on one’s mind, body and soul. In the same vein, a stressed balance sheet could be just as detrimental to a credit union and its members.
In today’s improving economic climate, consumers are spending more, and credit union lending is on the rise. On the surface, this looks promising. But rising interest rates have the potential to drain available liquidity and place added stress on credit union balance sheets. Liquidity stress may result from:
- Reluctance to raise deposit rates
- More competition and ease of transferring balances
- Rise in loan volume
- Slowing deposit growth
- Increased consumer spending
- Use of leverage/borrowings to boost returns
- Wealth transfer to younger generations
To reduce and manage these stresses, credit unions must work to find the “right” balance between required funds and available liquid funds, without holding too much liquidity for an extended period. This requires a strong understanding of liquidity risk (a hot topic with examiners), liquidity sources and uses, as well as contingency funding plans. One way to ensure your credit union has sufficient liquidity and a viable contingency plan is to perform stress testing – ideally, BEFORE stress-inducing events occur.
Establishing effective contingency plans early is critical. But, how does a credit union develop the right set of tests?
Basic liquidity forecasts are often built off of the current business plan. By forecasting and tracking key liquidity metrics, you can set thresholds or triggers and identify potential “red flags.” But what happens when the future doesn’t go according to plan or "extraordinary" events occur?
Dynamic Stress Testing
Dynamic stress testing takes the traditional liquidity forecast a few steps further. It accounts for a variety of events, such as economic disruption, natural disasters, employer layoffs, deposit runoff, elevated credit losses, inability to sell assets, members drawing out more on their lines of credit, etc. Similar to the basic liquidity forecast, dynamic stress testing evaluates key ratios and triggers identified in liquidity risk policies. The goal with stress testing is to identify scenarios or a sequence of events that likely would result in elevated levels of liquidity stress.
Above all else, stress scenarios must be meaningful and include a reasonable baseline: a mix of probable and plausible events, as well as extreme possibilities. Not all scenarios have to be likely. Standard scenarios include:
- Traditional rate shock scenarios
- Share runoff scenarios
- Contingent liability funding (credit cards, LOCs, HELOCs, etc.)
- Reduced/limited access to term funding
- High/low probability events (employer layoffs, rising loan losses, etc.)
Stress testing is not an exercise to invoke fear. Instead, it is a prudent balance sheet management strategy that assures credit unions have an effective plan when – not if – challenges arise.
|Categories: Business Partners, Compliance, Education & Training, Financial & Auditing, Strategic Planning & Consulting
Director of Training Remote Transaction Resources,
Credit Union Resources, Inc
Communication is really going to new heights or maybe lows. It depends on who you are and your communication tools related to “Social Media”. I sent a “txt” message to one of my nieces spelling most of the words fully. I was just asking her how she was doing if she had completed her science project for competition. She sent a VERY simple reply, it was a string of “emoji’s”. Not a single word spelled out only these symbols or “emoji’s” as they are called. It sparked a curious thought as to where this all came from and for that a nervous where is our style of communication evolving or digressing to?
Did you know the word emoji the original meaning is pictograph or picture character. It comes from Japanese e (?, "picture") + moji (??, "character"). I couldn’t help but Google it.
Shigetaka Kurita designed the first emoji’s. I found the following article in The Guardian, Thursday, October 27th, 2016 about Shigetaka Kurita. https://www.theguardian.com/technology/2016/oct/27/emoji-inventor-shigetaka-kurita-moma-new-york-text Chinese characters and street signs were his inspiration for the emojis. The point of these symbols was to convey emotions and thoughts without the symbols polarizing the people seeing them. The emoji centers on an idea not an emotion of the person sending a message. As seen below Kurita come up with an original 176 images that eventually became the foundation for emoji everywhere! Kurita debut of the emojis was February 1999 and was related to the world’s first mobile Internet system NTT DoCoMo’s i-mode. Below are the original foundation of emojis.
The original set of 176 emojis, acquired by MoMA. Photograph: Shigetaka Kurita/AP
As have found when communicating using txt, Messenger, Facebook, Whatsapp, and other social media an emojis is key. A whole sentence however long or brief can be completed using just these emojis. It is cryptic in nature but, still gets a person’s point across. It amazes me that a simple discussion with someone can be reduced to only symbols. These symbols are nothing like the hieroglyphics of our ancestors. They can get very specific! There is no conversation spoken and no emotions shown or expressed other than that of a picture. Which you hope explains clearly what you are trying to say or relay to someone without offending them or giving them the wrong impression.
What is the difference between an emoji and an Emoticon? Cydney Grannan Demystified/Technology 6-2016 https://www.britannica.com/demystified/whats-the-difference-between-emoji-and-emoticons An emoticon is what we used to utilize when trying to type an emotion on our key pad using letters, numbers, and punctuations :) a smile or a frown :-) Because our key pad has limitations the symbols were always sideways. The emojis is as stated above are pictures of faces, symbols, and objects allowing us to be more specific in our communications and emotions being conveyed to others!
Kathleen Chaykowski wrote an article in Forbes February 14th, 2016 pertaining to Facebook no longer just having the “Like” button. Facebook users had been hounding the company to expand the options when making a simple comment about a topic. The icon options expanded to not just Like but, Love, Haha, Wow, Sad, and Angry. We can now make a more clear expressions to what we had read or view and do so quickly with a simple image!
So, with our heads in our computers, cell phones, iPads and so on…. Where will our communications skills evolve or as stated in the beginning of this article digress to? It can be difficult enough these days trying to have an actual spoken conversation with friends, family, and coworkers.
Have a great day everyone! :) J
|Categories: Employment & Staffing, Marketing & Printing
Credit Union Resources, Inc
We all dread this time of year when we gather all our income statements and receipts to begin the dance of how much we owe Uncle Sam. Unfortunately, crooks also know that this time of year is ripe for fraud. With last night tax filers already stressed, social engineers are hard at work. Per us-cert.gov, “The Internal Revenue Service (IRS) has released an alert warning of phishing email scams targeting last-minute tax filers. The alert describes common features of these cyber crimes and includes recommendations to protect against them: strengthen passwords, recognize phishing attempts, and forward suspicious emails to email@example.com.”
Let’s go over a little about what social engineering is, and how everyone must remain vigilant. Social engineering, in a nutshell, is the act of manipulating people into performing actions or divulging confidential information, rather than by breaking in or using technical hacking techniques. Basically, it’s non-technical hacking. Some of information they’re looking for includes (but is not limited to):
- Full name
- Address / phone numbers (past and present)
- Date of birth
- Social security number
- Mother’s maiden name
- Children’s name
- Loan information
- Account numbers
Special attention should be paid to the bolded entries. SSN’s and account numbers are often used by credit union members as their online banking login. You may not always have control over this, but we urge you to work with your vendor to have the system use a unique login ID.
Another strong fraud prevention measure is strong passwords. If you’ve seen us mention this in blogs and presentations in the past, it just shows how vital this is. Instead of simply using a password, try a passphrase. Think of a simple phrase that’s easy for you memorize but would be hard for anyone else to guess. Take the first letter of each word to form your new password. You can alternate upper and lower case letters, as well as substitute in numbers and special characters for additional security.
And finally (at least for this blog) we’ll cover phishing. This is probably one of the most popular attempts at fraud. If you ever receive an email, especially from someone or somewhere you don’t recognize, NEVER click on the link or open an attachment. If it’s some kind of notice about a bill or an online account, open your browser and go directly to the site before entering any information. If you think you’ve received one, please follow the steps above and forward firstname.lastname@example.org.
Today more than ever, online safety and vigilance is essential. Besides following the safety tips listed above, it’s a good idea to subscribe to us-cert.gov. If you’ve ever heard about a virus outbreak or a software vulnerability on the nightly news, odds are US-CERT released a warning at least a week ago. So hopefully this will help you have a merry tax season, won’t have to pay too much (“sorry kids, no vacation this year”), or receive a nice refund (new boat!).
|Categories: Technology Consulting & Compliance