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Central Liquidity Facility
Nobody borrows until somebody saves - or so the credit union aphorism goes.
WesCorp is no different. Credit union loans are funded from credit union
investments. Unfortunately, unlike consumer deposits that are closely tied with
members’ life cycles and offset one another, credit union investments are tied
to an economic cycle. As a result, the industry is either awash in excess
funds, as it is currently, or the industry experiences a credit crunch as it
did in the late 1970s.
To address this, the NCUA established the Central Liquidity Facility (CLF) as a
lender of last resort for the nation's credit unions following the credit
crunch of the late 1970s. The CLF can access up to $20.7 billion from the
Federal Financing Bank and lend that money to credit unions. With many credit
unions experiencing increased loan demand, the CLF represents a great liquidity
resource.
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The NCUA has published
NCUA Letter 99-CU-18 regarding the workings of the CLF.
If you have questions about the CLF or the LNLA, please call
(800) 442-4366
ext. 6349 – Valerie Loeza
ext. 6344 – John Taylor
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Accessing the CLF
While a few credit unions may choose to join the CLF directly, WesCorp acts as a
CLF agent for most of our members. However, before we can access CLF funds on
your behalf, you must substantiate your liquidity needs and take the following
four actions, or risk CLF denial.
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Ensure that your credit line is established with WesCorp and that it is large
enough to cover any eventuality.
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Complete a Liquidity Need Loan
Application (LNLA)
and forward it to WesCorp.
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Update your borrowing authorization (designating who is authorized to borrow),
if necessary.
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Advise WesCorp if any of your assets are pledged to other borrowing sources
(for example, collateral pledged to FHLB). CLF loans must be secured by a first
priority security interest in assets equal to 110 percent of the CLF loan.
Borrow funds as you normally do. Most members automatically borrow through the
settlement process. However, if your credit union will be a protracted borrower
with excessive fund demands, advise WesCorp so we can submit your loan to the
CLF. The rate on CLF loans is favorable and will not exceed the three-month
Treasury Bill equivalent yield plus 12.5 basis points.
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Loans
