Rather, NCUA s long-standing position is that the CLF was established to be used sparingly as a stabilizing agent in times when liquidity needs threaten to disrupt credit unions ability to provide basic financial resources to their members. Accordingly, NCUA s long-held policy that the CLF is a backup liquidity provider remains unchanged. Although CLF advances are available when appropriate, NCUA emphasizes the importance of liquidity planning and contingency funding. NCUA expects credit unions to have in place adequate programs and procedures to manage their liquidity risk. Each credit union s liquidity management program should be appropriate for the overall level of risk incurred, considering its asset size, complexity, capital adequacy, and products or services offered.
Inadequate liquidity can cause disruptions in member services and diminish public confidence.
It can also increase a credit union s vulnerability to other market and operational risks. The failure to understand and manage liquidity risk adequately could easily place a credit union in an unsafe and unsound financial position. As part of normal contingency planning, credit unions are expected to develop funding plans that include credit lines that are accessible on a timely basis. This may be accomplished with a corporate credit union or other source. The appropriateness of granting a CLF advance depends on the circumstances of the credit union at the time of the liquidity need.