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FRM Part II · FRM Exam Part II · Intraday Liquidity Risk Management

A bank has 150m of central bank reserves and 80m of unencumbered collateral that can be pledged for intraday credit at the start of the day, plus 30m of credit lines from a correspondent that are uncommitted and not guaranteed to be available. Its peak usage during a stress scenario is 240m. Counting only the Basel-defined available intraday liquidity (excluding the uncommitted lines) and ignoring other adjustments, what is the shortfall or surplus?

There is a shortfall of 10m. Available intraday liquidity is 230m, being reserves of 150m plus 80m of pledgeable collateral, with uncommitted lines excluded. Peak stressed usage of 240m exceeds this by 10m. Counting the 30m uncommitted lines would wrongly show a 20m surplus.

  1. AShortfall of 10mCorrect
  2. BSurplus of 20m
  3. CSurplus of 10m
  4. DShortfall of 40m

Explanation

Available intraday liquidity is 150 + 80 = 230m, excluding the 30m uncommitted lines. Against peak usage of 240m this gives a 10m shortfall. Including the lines would give a 20m surplus, an incorrect treatment here.

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