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Liquidity Stress Testing

What is liquidity stress testing?

Pressing current loan, investment and deposit cash flows to see how a credit union is affected by changes in anticipated behavior is a basic form of stress testing. Identifying current cash flows and potential changes in anticipated timing and price of these cash flows are the focus of this service.

Why is stress testing important?

Strong balance sheet management always has an eye on the liquidity position of the credit union. Understanding potential stresses from lack of funding for operations, loans or higher cost funding is essential to proper management. 

Who does stress testing analysis help?

Stress testing allows CEOs, CFOs, regulators, and other credit union leaders better understand their credit union’s risk exposure to changes in the cash flows in the short and long-term time horizon. This enables them to identify and act upon performance opportunities and potential risk threats. Discovering the cash flow sensitivity and the funding costs that may change in an increasing rate environment helps managers plan the balance sheet strategy more effectively.

Why QuantyPhi?

As a wholly-owned CUSO of Corporate Central Credit Union, we know credit unions. We study how to analyze and manage current and future liquidity situations and the relevant pricing of liquidity in stressed situations. Following proper liquidity management techniques can help management better see exposures and adjust before exposure becomes loss.

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