FRM Part II · FRM Exam Part II · Monitoring Liquidity
A bank has ASF of 800 and RSF of 760 (USD millions), giving an NSFR above 100%. It plans to roll over 100 of retail term deposits (ASF 95%) into 100 of wholesale funding from a financial institution maturing in under six months (ASF 0%), and simultaneously to replace 100 of corporate loans over one year (RSF 85%) with 100 of Level 1 assets (RSF 5%). What is the resulting NSFR?
ASF falls by 95 to 705 and RSF falls by 80 to 680, so the NSFR becomes 705/680, about 103.7%. Replacing stable retail funding hurts the numerator, but swapping loans for Level 1 assets reduces the requirement.
- AAbout 103.7%Correct
- BAbout 105.3%
- CAbout 99.2%
- DAbout 110.5%
Explanation
New ASF = 800 - 95 = 705. New RSF = 760 - 85 + 5 = 680. NSFR = 705/680 = 103.7%. Ignoring the funding change gives 800/680 = 117.6%; ignoring the asset change gives 705/760 = 92.8%.
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