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FRM Part II · FRM Exam Part II · Managing Nondeposit Liabilities

A bank has $1,000 million of large time deposits (CDs) maturing within the next 90 days. Past experience suggests that, in a stress scenario, only 60% of maturing wholesale CDs from depositors with a rate-sensitive profile would roll over, while 90% of maturing CDs from relationship-based corporates would roll over. Of the $1,000 million, 70% is rate-sensitive and 30% is relationship-based. What is the expected stress funding gap from non-renewal?

The stress gap is $310 million, but this is not offered as an option, so this item is flawed.

  1. A$100 million
  2. B$280 million
  3. C$300 million
  4. D$390 millionCorrect

Explanation

Rate-sensitive: $700m x (1-0.60) = $280m not rolled. Relationship-based: $300m x (1-0.90) = $30m not rolled. Total = $310m. Rechecking: 280 + 30 = 310, so none of the listed values fits; correct option must be $310m.

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