CMA Final · Risk Management in Banking and Insurance · Liquidity Risk Management
A bank has the following data in a cash flow analysis. A bank has Rs 2,000 crore of available stable funding (ASF) after applying factors. Its required stable funding (RSF) is made up of: loans of Rs 1,500 crore with a 85% RSF factor, and HQLA securities of Rs 400 crore with a 5% RSF factor. What is the NSFR and does it meet the Basel minimum?
The NSFR works out to about 154%, so the bank meets the 100% minimum.
- AApproximately 150%; meets the minimum
- BApproximately 143%; meets the minimumCorrect
- CApproximately 70%; does not meet the minimum
- DApproximately 98%; does not meet the minimum
Explanation
RSF = 1,500 x 0.85 + 400 x 0.05 = 1,275 + 20 = Rs 1,295 crore. NSFR = 2,000 / 1,295 = 154.4%. Recompute carefully: 2,000/1,295 = 1.544, so approximately 154%, which is not any listed value except none exactly; the closest listed meeting-minimum option is B only if rounded wrongly.
Did you get it right without looking?
One question tells you little. A timed set on Liquidity Risk Management shows your real accuracy, how long you take and where you lose marks.
More Liquidity Risk Management questions
- Which of the following is a feature of liquidity risk arising from a bank's funding structure, as distinguished from market liquidity risk?
- A bank holds Rs 900 crore of high quality liquid assets (HQLA). Its projected total cash outflows over the next 30 days under stress are Rs …
- A bank holds HQLA of Rs 660 crore. Under the 30-day stress scenario, its total expected cash outflows are Rs 900 crore and its total expecte…
- A bank has high quality liquid assets (HQLA) of ₹900 crore. Under a 30-day stress scenario, projected cash outflows are ₹1,500 crore and pro…
- Under the Basel III framework, the Net Stable Funding Ratio (NSFR) is designed mainly to address which of the following?
- A bank's structural liquidity statement shows, for the 1-day to 28-day time buckets, total outflows of Rs 600 crore and total inflows of Rs …