FRM Part I · FRM Exam Part I · Banks
A bank has HQLA of USD 18 billion. Over the next 30 days under the stress scenario, it projects total cash outflows of USD 30 billion and total cash inflows of USD 12 billion (inflows are below the 75% of outflows cap). What is the bank's Liquidity Coverage Ratio?
The LCR is 100%. Net stressed 30-day outflows equal USD 30 billion less USD 12 billion of inflows, or USD 18 billion, and the HQLA of USD 18 billion divided by this amount gives exactly 100%, which meets the regulatory minimum.
- A60%
- B100%Correct
- C150%
- D90%
Explanation
Net cash outflows = 30 - 12 = 18 billion (inflows are 40% of outflows, under the 75% cap). LCR = HQLA / net outflows = 18/18 = 100%. Using gross outflows gives 60%, which ignores inflows.
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