In addition to the requirement specified in paragraph (b) of this section to establish and maintain a CFP, any credit union insured pursuant to Title II of the Act that has assets of $250 million or more must establish and document access to at least one contingent federal liquidity source for use in times of financial emergency and distressed economic circumstances. These credit unions must conduct advance planning and periodic testing to ensure that contingent funding sources are readily available when needed.

Brief description of CLF (Facility) and its purpose

Submitted by sevans on Tue, 02/17/2015 - 1:28pm

This part contains the regulations implementing the National Credit Union Central Liquidity Facility Act, subchapter III of the Federal Credit Union Act. The National Credit Union Administration Central Liquidity Facility is a mixed-ownership Government corporation within the National Credit Union Administration. It is managed by the National Credit Union Administration Board and is owned by its member credit unions.

There are three categories of liquidity sources that apply to liquidity planning. Each of these sources is relevant to the underlying safety and soundness of a credit union’s liquidity management program. Essentially, these sources act as layers of liquidity protection and function similar to a series of financial firewalls. The three categories are:

The NCUA Board adopted a final rule on liquidity and contingency funding plans on October 24, 2013.  NCUA adopted this rule to ensure all credit unions conduct sound liquidity planning, and large credit unions establish access to at least one federal source of contingent liquidity: the Federal Reserve Discount Window (Discount Window) and/or Central Liquidity Facility (CLF).  As we learned during the financial crisis, sound liquidity planning and access to federal liquidity sources are vital to the safety and soundness of the credit union system.