A liquidity crunch is looming for many banks. Prepare for the challenges ahead with these strategies.
Getting a clear window into your bank’s sources of funds, liquidity, and capital is especially important in times of economic turbulence. And right now, uncertainty about unemployment, viability of businesses and even entire industries, and government assistance efforts all point to the need for understanding your current and future liquidity situation. Any – or all – of these issues could cause a lot of money to flow out of your business abruptly if circumstances play out badly.
Obtaining a better view of your bank’s liquidity begins with a mindset shift. Specifically, this entails moving toward more frequent examinations of your credit risk, understanding the potential demands on your deposit funds, and managing capital plans by taking a future-oriented look at what’s possible, good or bad. This can help you avoid major unpleasant surprises with respect to large or unexpected deposit withdrawals and, of course, loan losses.
Our team of banking specialists has identified these three strategies to help you prepare for a potential capital crunch.