adopted broadly, instant settlement and automated fund movement could shorten expected deposit lives and increase rate sensitivity. The practical result could be greater pressure on liquidity buffers, funding costs and the bank’s capacity for maturity transformation. Real-time payment services add another dimension. Faster payments do not necessarily create a liquidity problem, but they reduce the time available to identify, fund and respond to emerging pressure. A bank that once had hours, or even a full business day, to react may now need reliable intraday liquidity and clear decision-making processes. The key management question is not simply, “Will we lose deposits?” but “How would our liquidity, funding costs and lending capacity change if deposits moved faster or behaved less like core funding?” Build the Plan Before Stress A strong contingency funding plan should be practical, up to date, tested and integrated with the bank’s asset-liability management process. It should identify early-warning indicators, quantify credible stress scenarios, define available funding sources, and establish clear escalation and communications procedures. Here are four practices that can help: 1. Know the deposit base. Segment deposits by customer type, size, insurance status, relationship depth, operating purpose and demonstrated rate sensitivity. Management should understand which balances are likely to remain stable and which could move quickly in a stress event. 2. Maintain diversified funding. A contingency plan should identify multiple sources, such as Federal Home Loan Bank advances, Federal Reserve discount window capacity, correspondent bank lines, brokered deposits, deposit networks and loan participations or sales. The goal is not to use every source routinely, but to ensure several options are available when needed. 3. Keep collateral and documentation ready. Borrowing capacity is only useful if collateral records, legal agreements, and operating procedures are up to date. Banks should periodically verify available collateral, confirm borrowing limits and test the mechanics of accessing each facility. 4. Stress test speed, not just size. Traditional liquidity scenarios may focus on the total amount of projected outflows. In a faster-payments environment, management should also model how quickly deposits could leave, how intraday demands could develop and whether staff can execute the contingency plan under pressure. A Competitive Capability Digital assets and real-time payments may not reshape every community bank’s balance sheet at the same pace. Still, they could reduce the friction that has historically supported deposit stability and make liquidity events faster, more concentrated and more operationally demanding. Don’t wait for certainty to make liquidity readiness a competitive capability. Understand the deposit base in greater detail, maintain tested funding alternatives, calibrate pricing to funding quality and preserve sufficient, immediately available liquidity to serve customers through stress. A well-built contingency funding plan gives a bank more than an emergency playbook. It helps protect the franchise, defend lending capacity and support confident participation in an evolving payments landscape. For more information, visit pcbb.com. You can reach me via email at mjohnson@pcbb.com. Dedicated to serving the needs of community banks, PCBB’s comprehensive and robust set of solutions includes cash management services such as settlement and liquidity for the FedNow Service, international services, lending solutions and risk management advisory services. 21
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