Credit Union Annual Report 2022 - Flipbook - Page 84
THE CAYMAN ISLANDS CIVIL SERVICE ASSOCIATION (CICSA)
CO-OPERATIVE CREDIT UNION LIMITED
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 2022
22. Financial risk management (continued)
vii. Liquidity risk
Liquidity risk is that the Credit Union will not be able to meet its financial obligations as they fall due. The Credit
Union’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet
its obligations when under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Credit Union’s reputation.
The Credit Union’s liquidity management process includes the following:
•
Day-to-day funding, managed by monitoring future cash flows to ensure that requirements can be met. This
includes replenishment of funds as they mature or are borrowed by members;
•
Maintaining a minimum level of cash on hand and at bank, and placement of term deposits for varying periods
of time which can be easily be liquidated as protection against any unforeseen interruption to cash flow;
•
Monitoring balance sheet liquidity ratios against internal and regulatory requirements; and
•
Managing the concentration and profile of loan maturities.
The Credit Union also monitors unmatched medium-term assets, the level and type of undrawn lending commitments
and the usage of overdraft facilities.
On a monthly basis, the Chief Financial Officer prepares a liquidity report, which compares total loans to total
deposits (including shares) placed by members, cash on hand and cash at bank, including the funds placed on term
deposits with other financial institutions. This report is shared with the Chief Executive Officer and to the Board of
Directors. Furthermore, on a daily basis, management regularly reviews the total funds drawn down under loans,
including loan commitments compared to available funds to ensure that sufficient liquid resources are available. An
important element of the credit policies is a review of funds available to ensure that loan applications are not
approved without first considering the level of liquid resources available prior to entering into that commitment with the
member. The report also includes a summary of those members with significant amounts placed on deposit (balances
in excess of $100,000). As at July 31, 2022, approximately 10% (2021: 10%) of the member shares are held by 25
(2021: 25) members.
Of these 25 members, only a small portion of the funds on deposit (in the form of members ’ shares) approx. 0.51%
(2021: 0.51%) of total loans serve as collateral against those members’ loans. This represents a significant
concentration of liquidity risk arising from monies from these members.
The Credit Union is exposed to daily demands on its available cash resources from members ’ shares and deposit
accounts. The Credit Union does not maintain cash resources to meet all of these needs, as experience has shown that
trends for withdrawals can be predicted with a high level of certainty. If withdrawals are significantly in excess of
expectations and available resources, then this can increase the liquidity risk of operations.
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