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What is asset liability model validation?

Asset liability (A-L) model validation is an evaluation process in which every aspect of a credit union’s A-L model is compared against current methodology described as “best practices.”

Why is asset liability model validation important?

The information gained from validation helps credit unions determine if their A-L process is adequately capturing the full measure of interest rate risk (IRR) of the balance sheet. If true risk is not measured against an appropriate model, decision-making regarding risk will suffer, as will performance.

Who does asset liability model validation help?

A-L model validation assures CEOs, CFOs, asset liability committee (ALCO) members and other credit union leaders that the IRR measurement process accurately displays the IRR exposure of their credit union. It enables them to identify areas where investment IRR measurement may not fully capture true risk. These areas include modeling assumptions, account set-up, and reporting practices. In addition, validation ensures compliance with NCUA and other financial institution regulations.

Why QuantyPhi?

QuantyPhi’s asset liability experts will review critical areas of IRR measurement and management including:

  1. Objective data review
  2. Subjective assumptions data review
  3. Review of balance sheet risk and appropriateness of modeling focus
  4. Review of ALCO and board reporting
  5. Review of separation of duties
  6. Review of current IRR policy

Using powerful state-of-the-art technology, our highly-trained analysts will review your credit union’s IRR process, pinpoint areas not currently optimized for overall peak performance, suggest methods/practices to help improve your credit union’s asset liability management process, and help you implement any desired changes.

What is asset liability modeling?

Asset liability (A-L) modeling is the process by which a model simulation of a credit union’s financial statements under multiple interest rate scenarios is created with the intention of using that model to discover true exposure to interest rate risk.

Why is asset liability modeling important?

The information gained from A-L modeling allows credit unions to determine whether or not their balance sheet can withstand unfavorable market conditions and stay the course. A-L modeling, or income simulation, is an ongoing process in which credit unions continuously seek to understand their net risk position and the sources of that risk.

Who does asset liability modeling help?

A-L modeling allows CEOs, CFOs, regulators, and other credit union leaders better understand their credit union’s risk exposure. It enables them to identify and act upon performance opportunities and potential risk threats in both the short- and long-term. Once areas of progress/concern are singled out, re-structuring for optimal performance on both sides of the balance sheet can be implemented.

Why QuantyPhi?

As a wholly-owned CUSO of Corporate Central Credit Union, we know credit unions. We know how to build A-L forecasts that pave the way for continuous, safe, forward progress. Our A-L modeling techniques are time-tested, leading-edge practices, and they address all NCUA 12-CU-11 requirements. QuantyPhi can show you how to create A-L models that keep risk exposure within acceptable limits while maximizing opportunity in both good times and bad.

What is balance sheet consulting?

Balance sheet consulting is a service that reviews all aspects of a credit union’s current position—loan assets, liability structure and risk exposure—and makes recommendations as to how to address issues of concern, take advantage of hidden income opportunities, and limit risk if necessary.

Why is balance sheet consulting important?

Credit unions occasionally require fresh perspectives in the areas of balance sheet management, capital building projects, or staff/asset liability committee education. A thorough understanding of the complex implications of various balance sheet strategies—and their impact on the organization—helps credit union leaders develop targeted, goal-based plans with measurable results.

Who does balance sheet consulting help?

Balance sheet consulting helps time-limited credit union CEOs and CFOs make more educated, more insightful, strategic decisions. Using QuantyPhi’s high-tech data analysis systems, our consulting experts can run “what-if” scenarios, help you plan for unpredictable market fluctuations, and show you how to find opportunity on both sides of your balance sheet. We can show you how to build a better credit union by building better balance sheet components.

Why QuantyPhi?

When it comes to the credit union balance sheet, QuantyPhi can help solve multiple challenges credit union managers and supervisory committees face. QuantyPhi’s balance sheet strategists keep on top of market changes, regulatory issues, technological advances, and asset liability management (ALM) best practices, and are experts at building balance sheets with muscle, flexibility and stamina. As a CUSO of Corporate Central Credit Union, our mission is to help you make your credit union wildly successful.

What is a benchmark?

A benchmark is a standard against which the performance of the investment portfolio of the balance sheet can be measured. Since credit unions’ risk limits are bound by the liabilities currently on the balance sheet, benchmarking measures the limits against the current IRR of the balance sheet and optimizes the exposure. The benchmark is mathematically derived, and can be used to measure any portfolio, investment, loan, or liability.

Why is benchmarking important?

The information gained from benchmarking allows credit unions to instantly determine how efficient their investment decision-making is relative to the amount of risk they are incurring. Benchmarking is usually an ongoing process in which credit unions continuously seek the improvement of their net risk position. Mapping out an ideal position before making investment decisions provides credit union managers a clear pathway to success. In addition to offering credit union leaders performance guideposts, benchmarking helps determine when it’s time to commit excess funds and/or take on more risk.

Who does benchmarking help?

Benchmarking helps CEOs, CFOs and other credit union leaders define optimal investment strategies for their credit union. It enables them to identify where investment decisions lead, lag or remain at par with optimal portfolio performance. In addition, benchmarking provides the basis by which credit unions can judge investment options, as benchmarks help leaders identify which types of securities enhance their portfolios, and which are no longer adding to balance sheet performance.

Why QuantyPhi?

QuantyPhi will help your credit union create performance targets specific to your unique goals, and then help you develop portfolio strategies that provide optimum levels of return with a given level of interest rate risk (IRR). Our performance optimization experts use high-powered technology that can analyze changing market data quickly, run “what-if” scenarios, and generate reports that help set appropriate, achievable benchmarks. At QuantyPhi, we have the technology to constantly crunch the numbers so you don’t have to. We have the experts needed to interpret that mathematical data and show you how to meet/pass your benchmarks with flying colors. Our mission is to make your credit union a continual peak performer.

What is bond accounting?

Bond accounting provides an easy and effective way to monitor your institution’s bond and other investment portfolio. It keeps track of investments and provides monthly income calculations such as: accruals, interest payments, amortization, and accretion.

Why is bond accounting important?

Bond accounting is an efficient and affordable program that helps to prevent inaccurate entries when using spreadsheet calculations. It enables financial institutions to generate monthly accounting entries utilizing the most current, independent bond pricing and cashflow information from NRSRO's in a timely manner.

Who does bond accounting help?

Bond accounting helps CEOs, CFOs, regulators, and other credit union leaders better understand their institution’s investment portfolio and make more informed portfolio management decisions.

Why QuantyPhi?

QuantyPhi’s bond accounting product is delivered through our web portal and can be accessed anywhere, anytime, on any device. Benefits of our platform include, but are not limited to:

  • No software installs or updates, meaning you will always have the most up-to-date version
  • Robust accounting and management reports with unlimited sorting and exporting capabilities
  • Archived reports for future access
  • XLS exporting format for easy integration into your institutions’ general ledger or spreadsheets
  • Reporting that allows for pledging and safekeeping tracking across multiple financial institutions
  • Independent third-party pricing and cashflow data from NRSRO

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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.

What is non-maturity deposit analysis?

Non-maturity deposit analysis is the review of regular savings, money market, and checking accounts of a credit union to estimate the price sensitivity and expected life of those accounts. Understanding the past behavior of members and their deposits gives a credit union insight into the likelihood of these accounts in the future.

Why is deposit analysis important?

The information gained from non-maturity deposit analysis allows credit unions to determine whether their less expensive funding is likely to remain available. Income simulation, or A-L modeling, requires that assumptions are made on these deposits. A proper analysis gives a sound basis for these assumptions in many interest rate environments.

Who does non-maturity deposit analysis help?

Non-maturity deposit analysis allows CEOs, CFOs, regulators, and other credit union leaders better understand their credit union’s interest rate risk exposure. A-L modeling enables them to identify and act upon performance opportunities and potential risk threats in both the short- and long-term. Discovering the price sensitivity and the deposits that may leave in an increasing rate environment helps managers plan the balance sheet strategy more effectively.

Why QuantyPhi?

QuantyPhi will do the ground work. We will gather the data, apply the statistical analysis, compare the balance sheet makeup, and explain the results to you so you can manage the balance sheet more effectively. We know how to analyze previous pricing and balance information and calculate the relevant statistical review. Separating and properly modeling sticky and non-sticky deposits will help avoid inferior modeling assumptions.

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What is a policy review?

A policy review will assess asset liability management, liquidity, and investment policies. Emphasis in the review will be ensuring policies address NCUA Letter 12-CU-05 addressing Interest Rate Risk Policy and Program Requirements.

Why is a policy review important?

Ensuring a credit union’s policies address requirements by NCUA will always be mandatory. A policy the helps guide a credit union toward best practice while establishing a clear directive in risk management is a must. In an interest rate risk sensitive industry, a policy review will be imperative to be compliant with NCUA regulations and follow sound practice.

Who does a policy review help?

A policy review will help a credit union by including suggested areas of improvement or change to comply with both the letter and spirit of “best practice” regarding IRR management.

Why QuantyPhi?

As a CUSO of Corporate Central Credit Union, QuantyPhi knows credit unions. Our mission is to help make your credit union wildly successful, while being compliant with NCUA.

What is portfolio analysis?

Portfolio analysis is a process in which a credit union’s investment portfolio is examined for performance value and potential. The information is then used to guide a future course. Its purpose is to determine areas of concern, as well as areas of opportunity and success.

Why is portfolio analysis important?

Credit unions often build investment portfolios independent of the balance sheet, acquiring investments as dealers make them available. Reviewing the entire portfolio’s performance on a scheduled basis prevents leaders from jumping on investments that may look like opportunities, but in truth, may throw off asset/liability balance, create unnecessary risk exposure, and steer the credit union away from its goals. When investment managers understand how every component of the portfolio has performed, and is performing—from both a capital-at-risk and an expected-return point of view—investment decisions are more likely to enhance performance.   

Who does portfolio analysis help?

Portfolio analysis helps credit union managers and asset liability committee members make more informed and more goal-aligned balance sheet liquidity/risk management decisions. It helps credit union CEOs and CFOs determine if the credit union is on track to achieve its performance benchmarks. It allows leaders to pinpoint areas that have performed well and not so well, shedding light on what’s working and what’s not. Regularly-scheduled portfolio analyses by highly-trained investment and risk experts are key to ensuring performance success.

Why QuantyPhi?

Expert portfolio analysis takes time, skill, and sophisticated data processing technology. Because portfolio analysis is one of our specialties, we can devote more attention and more time to performance examination than most credit union leaders. We have highly-trained analysts whose sole mission is to find ways to make credit unions more successful. We also house high-powered analysis technology most credit unions can’t afford. As a CUSO of Corporate Central Credit Union, QuantyPhi knows credit unions, and we can help you create portfolios that make your credit union a star performer.

What is risk modeling?

Risk modeling is the assessment of the probability of unfavorable market conditions and the potential impact those conditions may have on a financial portfolio. Risk modeling helps predict not only the performance of investments, loans, or liability portfolios during challenging times, but also predicts the magnitude of the effects of unfavorable market swings and loan delinquencies.

Why is risk modeling important?

Risk modeling is about measuring the amount of risk inherent in certain instruments. Credit unions that practice risk modeling are better prepared to handle potential losses created by delinquent loans held by members and potential losses resulting from negative fluctuations in portfolio market value. Monitoring risk and its potential impact is key to preparing for potential downturns in portfolio value.

Who does risk modeling help?

Risk modeling provides credit union leaders with guidelines for risk exposure. Scheduled, periodic risk review against a model offers CEOs and CFOs a better understanding of their credit union’s risk profile. It gives them the insight they need to create unique balance sheet portfolios that can withstand potential challenges. Risk modeling provides hypothetical scenarios, which are then used to strategize and optimize.

Why QuantyPhi?

As a CUSO of Corporate Central Credit Union, QuantyPhi knows credit unions. Our sophisticated, risk-strategy experts are highly-skilled in developing risk models unique to credit unions. Our high-powered data analysis systems can process varying risk scenarios at lightning speed, allowing credit union leaders time to react to unexpected losses with wise, goal-aligned decision-making. QuantyPhi’s risk-modeling experts can help your credit union manage risk to your advantage.

What is SimpliCD investing?

SimpliCD is a CD program managed by Primary Financial Company, LLC, a CUSO owned by Corporate Credit Union Network members, including QuantyPhi. SimpliCD enables members to easily invest excess funds in federally-insured CDs. The program gives credit unions the advantages of competitive and exclusive rates, and the convenience of consolidated reporting.

Why is SimpliCD investing important?

SimpliCD provides credit unions a one-stop solution to excess-fund investing. Credit unions using the SimpliCD program have access to national rates and a wide variety of issuers. They get one-location recordkeeping and consolidated fund settlements. SimpliCD makes cash flow management less stressful and less time-consuming.

Who does SimpliCD investing help?

SimpliCD helps credit union managers maximize the earning potential of excess funds, safely and conveniently. Because it simplifies cash flow management, and because all relevant records are stored in one location, it saves managers time and streamlines the recordkeeping process.

Why QuantyPhi?

At QuantyPhi, we are all about solutions, safety and profitability. As a CUSO of Corporate Central Credit Union, we know credit unions, and our mission is to help make your credit union wildly successful. QuantyPhi’s SimpliCD program can help your credit union maximize profitability while simplifying your cash flow management and recordkeeping processes. QuantyPhi can show you how to use SimpliCD to your credit union’s best advantage.

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What is SimpliCD issuing?

SimpliCD issuing, part of the SimpliCD program managed by Primary Financial Company, LLC, refers to the issuing of federally-insured CDs by your credit union. When issuing through this program, your offerings are available to a nationwide market of credit union investors. Along with ease of consolidated reporting, SimpliCD issuing allows your credit union to raise funds quickly and easily.

Why is SimpliCD issuing important?

SimpliCD offers credit unions a simple fundraising solution. With SimpliCD, credit union managers get easy access to purchasers. They get convenient, one-location recordkeeping and settlement of funds consolidation. SimpliCD makes cash flow management less stressful and less time-consuming.

Who does SimpliCD issuing help?

SimpliCD issuing helps CEOs and CFOs manage cash flow and recordkeeping with ease. The cash flow management benefits of SimpliCD issuing save credit union leaders time, reduce stress, and make the job of managing cash flow simpler.

Why QuantyPhi?

As a CUSO of Corporate Central Credit Union, QuantyPhi knows credit unions, and our mission is to help make your credit union wildly successful. QuantyPhi can help your credit union use SimpliCD to your best advantage.

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What is training?

Training involves working closely with your Board/ALCO/staff to provide training on asset liability management or other balance sheet management topics. We provide training through one-on-one meetings, live seminars/workshops and webinars.

Why is training important?

Training on asset liability management or other balance sheet management topics is crucial to stay up to date on changing regulations and policies.

Who does training help?

Training helps both you and QuantyPhi. Training will help you better your staff and credit union in ALM and balance sheet management while exposing QuantyPhi to an array of questions natural person credit unions have.

Why QuantyPhi?

As a CUSO of Corporate Central Credit Union, QuantyPhi knows credit unions, and our mission is to help make your credit union wildly successful. QuantyPhi values the availability of information to our customers; therefore; we have dedicated a page that displays helpful industry links, and relevant books along with other reading materials that you may enjoy.

QuantyPhi
6262 South Lowell Place, Muskego, WI 53150
Phone: (414) 433-0176 | Fax: (414) 427-3700
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