Liquidity Risk for Community Banks

Liquidity risk has always been a concern for community banks, but it became a focal point in 2022 due to increasing interest rates and declining bond prices. Despite the evolving dynamics resulting from the Federal Reserve Board's rapid interest rate increases, the fundamentals of liquidity risk management have not changed. Regulators still expect community banks to demonstrate diligent oversight by engaging qualified third parties to conduct periodic audit procedures specifically focused on liquidity risk management.