It is critical for credit unions to avail themselves of reliable liquidity sources. DTC-eligible CDs will be an important part of that mix. The recent experience of the pandemic demonstrated the value of sourcing external liquidity in a “callable” format, as many credit unions were forced to retain FHLB borrowing during a period of excess liquidity. This predicament resulted in additional pressure on balance sheet and capital ratios that did not have convenient remedy. DTC-eligible CDs are one of the most convenient and cost-effective methods to incorporate external funding in a callable format.
Repurchase agreements may also be utilized by credit unions as a source of funding or an opportunity for short-term investment. Often this borrowing was designed to create positive arbitrage with other investments. To date, the use of repurchase agreements is generally confined to some of the largest and most sophisticated credit unions. Olden Lane is committed to introducing this tool to a broader universe of credit unions.