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

A bank has 400m of available intraday liquidity at the start of each day. Over 20 days its daily maximum usage averages 150m, but on a stress day when a major correspondent delays payments, maximum usage reaches 310m and time-specific obligations of 120m are due by 10:00 when only 20m has been received. Cumulative net outflow before 10:00 on that day is therefore 100m from these items alone. Which conclusion is best supported?

Headroom at the stress peak is 90 million, found as 400 million of resources less 310 million of peak usage. Resources were not breached, but the early time-specific obligations show timing risk that the peak figure alone hides, so the bank should not conclude risk is absent.

  1. AHeadroom at the stress peak is 90m, but the early-day time-specific obligations show intraday timing risk that peak usage alone does not revealCorrect
  2. BThe bank has no intraday risk because usage never exceeded 400m
  3. CHeadroom is 250m because the average usage is the relevant benchmark
  4. DHeadroom is negative at the peak, so the bank breached its resources

Explanation

Headroom at the stress peak is 400 - 310 = 90m, so resources were not breached. Using the 150m average (250m) understates risk, as stress peaks matter. The 100m early net outflow from time-specific obligations shows timing pressure that a single end-of-day peak figure does not capture, so monitoring both is valuable.

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