With the Fed cutting rates by 100 basis points since last year and now seemingly paused, bankers are rethinking their strategies for funding and liquidity management. Today’s rate environment may tighten the spread between earning assets and liabilities, requiring bankers to adjust. Here are three strategies bankers can leverage now to walk this tightrope: 1. Examine and Reprice Short-Term Liabilities: Rates that remain higher for longer will impact profitability. To counterbalance, banks will need to reprice a portion of their liabilities, reducing interest paid to some depositors. While some customer runoff will be inevitable, bankers should prudently consider their approach, as cutting rates too swiftly (or for too many customers) could lead to unexpectedly large losses in funding. Thoughtfully considering which classes of customers will see deeper rate cuts (preserving higher rates for higher-value depositors), in conjunction with using short-term funding solutions, can help banks maintain desired funding and optimal liquidity levels. As an example, IntraFi’s ICS® service can provide floating-rate, short-term funding that reprices quickly, enabling banks to take full advantage of potential rate cuts and replace high-cost deposits that may leave because of rate changes. This can be done using ICS’ One-Way Buy® feature, through which banks can access floating-rate funding at select terms (from overnight to multiyear) without collateralization requirements. Strategies for Managing Liquidity in Today’s Rate Environment By H.D. Barkett, Senior Managing Director, Treasury Desk IntraFi, ICBC Associate Member 30 | INDEPENDENT REPORT
RkJQdWJsaXNoZXIy MTg3NDExNQ==