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ISU Credit Union and the Great Recession: Asset-Liability Management Issues
Idaho State University Credit Union (ISU CU), despite being a well-managed depository institution, had to deal with the fallout of the worst recession since the Great Depression. As its capital-asset ratio fell precipitously, it successfully restored its capital with three strategies, but in turn these actions lead to increased interest rate risk. A basic measure of interest rate risk is called the “GAP.” This case describes actions by the Asset-Liability Management Committee (ALCO) to respond to these conditions and keep the GAP within acceptable levels, and explains how to perform a GAP analysis and interpret the results.
- Explain how actions intended to increase the capital-asset ratio impacted other aspects of the management of the financial institution.
- Perform a GAP analysis for a credit union.
- Identify factors that affect the GAP and analyze their impacts.
- Evaluate strategies that affect the GAP and assess their impacts.
This descriptive case is appropriate for a junior/senior level finance, money and banking, and/or financial institutions course.