4 Steps Government CFOs Should Take In a Declining Rate Environment
November 11, 2024
4 Steps Government CFOs Should Take In a Declining Rate Environment
Markets and interest rates go up and come down; these are facts of the financial world we live in. If you are a CFO of a County or Municipality these are things that greatly affect you and your finances.
In a declining rate environment, the interest you earn from your deposits can be a major factor in how you manage your cash flow. For example, if you’re the CFO of a County with $50 million in the bank earning 5% interest you can earn as much as $2.5 million each year in interest income. If that interest rate drops to 4% you will only earn $2 million in interest, a reduction of $500 thousand dollars.
In a declining rate environment, a government CFO’s ability to control interest rates is limited. However, during these periods, though, there are several steps you can take to better manage your cash flow to optimize your available funds:
1. Reassess Revenue Streams: Identify which sources of income most stable and prioritize them. Diversify where possible to reduce reliance on any single stream.
2. Optimize Expenses: Conduct a thorough review of your expenses and cut any unnecessary costs. Negotiate better terms with current vendors and suppliers.
3. Forecast Cash Flows: Create detailed cash flow forecasts to anticipate shortfalls and adjust your strategy.
4. Stay Informed: Keep abreast of market conditions and interest rate forecasts and trends to adjust your strategy appropriately.
Having a financial institution that is a true partner is key in navigating these challenging times. A good banker can help you think through some of these steps. If you have any questions or would just like to have a conversation to discuss how Kearny Bank helps government banking clients like you thrive across different economic environments, please contact me to schedule a call.
By Jack Anastasi, SVP | Director of Government and Vertical Banking
About Jack:
Jack D. Anastasi is Kearny Bank’s Senior Vice President, Director of Government and Vertical Banking. Working in conjunction with the bank’s Government Banking Team and its Vertical Relationship Officers, Jack is charged both with managing and expanding Kearny Bank’s government and business banking relationships, through exceptional client service and enhanced product development.
Jack has a wealth of experience in government, retail and business banking sectors and provides our valued clients with precisely the type of outstanding banking service they’ve come to expect from Kearny Bank. Jack currently sits on the Board of Directors of several charitable foundations and advisory boards, Anastasi has more than 20 years of experience in government, small business, and retail banking. To learn more about Kearny Bank’s Government and public sector banking capabilities, contact Jack.