This interagency guidance (NCUA, FRB, FDIC, OCC and OTS) reiterates the process that institutions should follow to appropriately identify, measure, monitor, and control their funding and liquidity risk. In particular, the guidance re-emphasizes the importance of cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets, and a formal well-developed contingency funding plan as primary tools for measuring and managing liquidity risk.
The agencies expect every depository financial institution to manage liquidity risk using processes and systems that are commensurate with the institution’s complexity, risk profile, and scope of operations. Liquidity risk management processes and plans should be well documented and available for supervisory review. Failure to maintain an adequate liquidity risk management process will be considered an unsafe and unsound practice.
ENCL: Final Interagency Policy Statement on Funding and Liquidity Risk Management contains interagency guidance issued by the federal financial institution regulators, including the NCUA. It explains the regulators’ expectations on sound practices for managing funding and liquidity risk.