FRM Part I · FRM Exam Part I · Banks
A bank has HQLA of USD 18 billion. Under a 30-day stress scenario, projected cash outflows are USD 40 billion and projected cash inflows are USD 10 billion (below the Basel III inflow cap). What is the bank's Liquidity Coverage Ratio?
The LCR is 60%. Net 30-day stressed outflows equal USD 40 billion minus USD 10 billion, or USD 30 billion, and dividing HQLA of USD 18 billion by this gives 0.60. The ratio is below the 100% minimum.
- A45%
- B60%Correct
- C180%
- D225%
Explanation
LCR = HQLA / net cash outflows over 30 days. Net outflows = 40 - 10 = 30. LCR = 18/30 = 60%. Using gross outflows gives 45%, which ignores inflows.
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