FRM Part I · FRM Exam Part I · Banks
A bank has HQLA of USD 12 billion. Projected total cash outflows over the next 30 days under stress are USD 20 billion, and projected inflows are USD 6 billion. Assume inflows are not capped by the 75% limit in a way that binds. What is the bank's Liquidity Coverage Ratio?
The LCR is HQLA divided by net stressed 30-day cash outflows. Net outflows are 20 minus 6, or USD 14 billion, so 12/14 gives 85.7%. Using gross outflows would wrongly give 60%, because inflows must be netted against outflows.
- A60.0%
- B85.7%Correct
- C100.0%
- D200.0%
Explanation
Net cash outflows = 20 - 6 = USD 14 billion. LCR = 12/14 = 85.7%. The 60% option divides by gross outflows (12/20) and ignores inflows. The 100% option has no basis in the data. The 200% option reverses the ratio incorrectly.
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