FRM Part II · FRM Exam Part II · Monitoring Liquidity
A bank has high-quality liquid assets (HQLA) of USD 90 million. Projected 30-day stressed cash outflows are USD 160 million and stressed inflows are USD 40 million. Assuming inflows are not capped, what is the Liquidity Coverage Ratio?
The LCR is 75%. Net stressed outflows are 160 minus 40, or USD 120 million, and HQLA of USD 90 million divided by 120 million gives 0.75. Ignoring inflows would give 56.3%, which overstates the shortfall.
- A56.3%
- B75.0%Correct
- C45.0%
- D225.0%
Explanation
Net outflows = 160 - 40 = 120 million. LCR = 90/120 = 75%. Using gross outflows gives 56.3%, a mistake of ignoring inflows. 90/200 = 45% adds inflows to outflows. 225% inverts the ratio (90 divided into 160... actually 90/40).
Did you get it right without looking?
One question tells you little. A timed set on Monitoring Liquidity shows your real accuracy, how long you take and where you lose marks.
More Monitoring Liquidity questions
- A treasurer converts a contractual gap into a behavioral gap. Retail demand deposits of USD 800 million are contractually repayable on deman…
- A bank reports the following contractual cash flows (USD million) for the next three time buckets. Bucket 1 (0-7 days): inflows 120, outflow…
- 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%) …
- A treasurer builds a cash flow projection under a stressed scenario. Which assumption set is most consistent with sound practice for stresse…
- During a market-wide stress, a bank finds that its funding sources dry up at the same time as the assets it planned to sell lose value and b…
- A bank runs an intraday stress test. Its available intraday liquidity is USD 500m. Normal peak usage is USD 300m. Under stress, (i) a counte…