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FRM Part II · FRM Exam Part II · Liquidity Risk Reporting and Stress Testing

A bank has the following liabilities by currency (USD billions): USD 60, EUR 25, JPY 10, GBP 5, total 100. Under BCBS 144, the LCR by significant currency is monitored where aggregate liabilities in that currency are at least what share of total liabilities, and which currencies here are therefore significant?

The threshold is 5% of total liabilities. USD at 60%, EUR at 25%, JPY at 10% and GBP at exactly 5% all meet it, so all four currencies are significant and the bank should monitor LCR in each.

  1. A5%; USD, EUR, JPY and GBPCorrect
  2. B5%; USD and EUR only
  3. C1%; USD and EUR only
  4. D10%; USD, EUR and JPY

Explanation

A currency is significant if its liabilities are at least 5% of total liabilities. GBP at exactly 5% meets the threshold, so all four currencies qualify. Treating the threshold as strictly greater than 5% would wrongly drop GBP. The 1% and 10% figures are not the BCBS threshold.

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