Asset liability management in credit unions: Evidence from Brazil

Abstract

This study aims to analyze the matching of discretionary asset and liability accounts in Brazilian credit unions and their evolution over time. Asset liability management for discretionary accounts and their evolution over time have not been addressed in previous studies, which have mainly focused on standardized account balances to analyze financial institutions, but not all Brazilian individual credit unions. The findings are particularly relevant to academia, managers and banking regulators by providing insights into discretionary account management. They contribute to a deeper and more practical understanding of asset liability management in the national context, with findings on the positive evolution over time, size and periods of economic crisis. The study can positively impact the efficient management of credit unions, minimizing financial risks and promoting financial inclusion in communities where these institutions play a significant role. Canonical correlation was used in the management of seven asset accounts and nine liability accounts to evaluate 672 Brazilian individual credit unions, from 2014 to 2022, totaling 5,361 observations. Asset liability management occurs, on average, in twenty percent of credit union discretionary accounts, allowing for their active management. A positive trend was observed in the dependence of these accounts over time. When analyzing the influence of size, greater dependence of the accounts was found in smaller credit unions. During periods of economic crisis, differences in management were more evident, and it is possible that managers adopted more efficient strategies during these periods.

Keywords:
capital structure; credit unions; canonical correlation