What is the primary focus of the Asset and Liability Management Committee (ALCO) in a credit union?

What is the primary focus of the Asset and Liability Management Committee (ALCO) in a credit union?

• A. Marketing products to new members.
• B. Approving loan applications.
• C. Managing liquidity, funding, and interest rate risk.
• D. Setting compliance training schedules.

Answer: (B)

Liquidity, funding, and interest rate risk management is the focus of the Asset and Liability Management Committee. ALCO oversees the balance sheet to ensure there is enough liquid funds to meet member withdrawals and loan demand, while also planning how those funds are sourced and invested. It analyzes funding maturity profiles, the cost of funds, and how changes in interest rates affect earnings and capital. Using tools like gap analysis, scenario testing, and liquidity forecasting, ALCO sets risk limits, approves funding and investment strategies, and develops contingency plans to protect the credit union in varied rate and liquidity conditions. Marketing products to members, approving individual loan applications, and scheduling compliance training are managed by other parts of the organization and aren’t ALCO’s primary focus.

Liquidity, funding, and interest rate risk management is the focus of the Asset and Liability Management Committee. ALCO oversees the balance sheet to ensure there is enough liquid funds to meet member withdrawals and loan demand, while also planning how those funds are sourced and invested. It analyzes funding maturity profiles, the cost of funds, and how changes in interest rates affect earnings and capital. Using tools like gap analysis, scenario testing, and liquidity forecasting, ALCO sets risk limits, approves funding and investment strategies, and develops contingency plans to protect the credit union in varied rate and liquidity conditions. Marketing products to members, approving individual loan applications, and scheduling compliance training are managed by other parts of the organization and aren’t ALCO’s primary focus.