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Inflation, quantitative tightening, unrealized security losses, slowing prepayment speeds, and deposit alternatives have created a war for deposits, according to a Filene Research Institute brief.
“It’s death by a thousand cuts in terms of the ripple effect of Federal Reserve action on the balance sheets of financial institutions,” writes brief author Mike Higgins, managing partner at Higgins & Associates. “The goal is to slow down activity, reduce the money supply, and get the economy back into some form of equilibrium.”
How can credit unions grow deposits in this environment? Higgins advises credit unions to:
“Rapid change is occurring,” Higgins says. “The best way to confront it is by understanding what’s going on, identifying the potential impact on your credit union, and developing action plans and tactics to address the new environment you are competing in.”