Education & Events

Watching the Rates

By Amanda Parsons - ALM Specialist

As expected, the April 28 Federal Open Market Committee (FOMC) meeting statement reiterated its earlier statements that the federal funds rate would likely remain “exceptionally low…for an extended period.” According to a Bloomberg News survey of economists, the federal funds target is expected to increase to 0.75% by the end of 2010. As with any survey, the range of responses varies widely, from no change in rates to a whopping 1.75% increase projected through the end of this year.

FOMC statement wording is key.  If they would suddenly raise interest rates without prepping us for it via
their statements months in advance, they could cause the market to overreact to the rate change.  The best
case scenario would be the FOMC slowly changing their “extended period” language over time in advance
of any rate change.  This would give the financial market a chance to factor in future rate changes.  The only
potential roadblock to this scenario would be a drastic change in economic conditions.  If the economy starts
recovering at a much faster pace, the FOMC will need to move quickly and may not be able to give us advance
warning of a rate change.

So what can you do to anticipate a rate change?  Continue to keep alert for any big news in the economy and
pay close attention to the statements after each FOMC meeting.  This is the schedule for the FOMC meetings
for the remainder of this year:

          June 22-23  
          August 10  
          September 21  
          November 2-3  
          December 14

When they hold a two-day meeting, the statement is released the second afternoon.

It’s recently come to my attention that many credit unions are unsure of what exactly the Balance Sheet Management
Group at Mid-Atlantic can do for them.  Basically, we offer anything you might need to help you manage your
balance sheet!  Here’s a list of our most popular services:

Asset Liability Modeling Service - If you don't have a model in place or are looking to switch providers, we work
with two providers to get you a fair price.  Each provider is a bit different in their approach.  We work directly with
one provider, FIMAC Solutions, to provide you with the modeling support, a summary report, training, conference
calls, and more.  The other provider, Fisher-Rager Consulting, does all of these things without much involvement
from Mid-Atlantic.  The pricing and the deliverables you receive vary.  I can send you sample reports and more
information on each option if this is along the lines of what your credit union is looking for.

ALM Process Assessment - If you already have a model and ALM procedures in place, we can go through your
entire process to check for inconsistencies, errors, and make sure everything is working the way you want it to. 

Model Validation - If you already have a model in place, we can make sure it's doing what it's supposed to do. 
Sometimes the NCUA will ask you to get your model validated if something looks off to the examiner.

ALM Policy Review - We can review your policy to make sure it conforms to the regulations and reflects your
credit union's desired procedures.

Education/Training - We can help if you're looking for someone to educate you or your Board on ALM.

Also, you may use us as a (free) resource if you have general ALM-related questions.  Just call or email me
anytime at 1-800-622-7494, extension 3265, or aparsons@midatlanticcorp.org.