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CMA Final · Risk Management in Banking and Insurance · Liquidity Risk Management

A bank has available stable funding (ASF) of Rs 540 crore and required stable funding (RSF) of Rs 450 crore. Which statement about its Net Stable Funding Ratio (NSFR) is correct?

The NSFR is 120 percent, which meets the minimum of 100 percent. It is computed as available stable funding divided by required stable funding, that is 540 divided by 450. A figure above 100 percent shows stable funding exceeds the funding needs of assets.

  1. ANSFR is 83.3%, so it breaches the minimum requirement of 100%
  2. BNSFR is 120%, so it meets the minimum requirement of 100%Correct
  3. CNSFR is 120%, so it breaches the minimum requirement of 100%
  4. DNSFR is 90%, so it meets the minimum requirement of 100%

Explanation

NSFR = ASF/RSF = 540/450 = 1.20 = 120%. This is above the 100% minimum. The 83.3% figure comes from inverting the ratio (450/540), which is the wrong way round.

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