Get Stress Tested!

By Mark S. Brantley, Esq. Chairman of the Board, Municipal Credit Union

to do the same. Financial stress testing is simply a simulation or dress rehearsal to determine a companys nancial stability post economic crisis. It is a form of disaster preparedness. The institutions assets, liabilities and capital (i.e., net worth) are assessed against various crisis scenarios to determine the companys safety and soundness. Some scenarios include but are not limited to: unemployment spikes, increased interest rates, investment losses, asset devaluations, etc. To pass a stress test, the company must have suf cient capital or reserves to absorb potential losses adequately. Likewise, individuals should perform their own nancial stress test to nd out if personal resources are adequate. Like preparing for a hurricane, you should prepare your household for any economic emergency or contingency. What if the stock market tanks and wipes out your 401(k)? Do you have an alternate source of retirement income like an IRA or pension? If you became sick or disabled for a long period of time, do you have adequate sick leave accruals stored, private disability insurance or credit card protection? If you were ever laid off or furloughed, do you have suf cient savings to weather the storm? These are tough questions but they are necessary. Planning could make a huge difference for you and your family. Credit unions like MCU provide products to assist you in passing your nancial stress test. We encourage savings and offer various products like disability insurance and credit card protection. Soon we will be rolling out a credit builder program to help you rebuild your credit score to access funds when you need them. Our low interest auto loans are extremely competitive should the need ever arise to purchase an automobile. Know that MCU desires for all its members and their respective families to thrive nancially without the stress of economic uncertainty. Prepare for the future; dont wait for another crisis to strike. Do your own nancial stress test now!

f we have learned anything Ithat in the past few years, it is we are living in an era of

crises. A housing bubble, high unemployment, frequent natural disasters, government shutdowns, debt ceiling brinkmanship you name it; Americans are grappling with uncertainty and fear on a regular basis. Neither you nor the most sophisticated computer program can calculate when a lay off, furlough, or unexpected illness forcing you to take leave from work might occur. Without some type of divine revelation, no one knows the future. But why wait until an unforeseen circumstance arrives at your nancial doorstep? You have to plan for the unforeseeable. You must undergo your own nancial stress test! In the medical eld, doctors routinely utilize stress tests to determine if there is adequate blood ow to your heart during increasing levels of activity. Typically a treadmill is used while the patient is monitored to see how far he/she can walk without experiencing chest pains or substantial change to a previously taken electrocardiogram. This examination is a preventive measure because unforeseen abnormalities such as plaque could be identi ed within the heart or blood vessels that restrict blood ow. Undetected, these conditions could prove fatal causing heart attacks or strokes. Therefore, stress tests are the front line defense against unforeseen, life-changing crises. Stress testing also has an economic application. After the worst of the nancial crisis was over, federal examiners required nancial institutions more speci cally, the large commercial banks to undergo stress testing to prevent future systemic failure. Soon, credit unions over $10 billion in assets will also be required