FRM Part II · FRM Exam Part II · Liquidity Risk Management
A bank has the following stressed 30-day cash flows (USD millions): outflows of 400 from retail deposits and 600 from wholesale funding, and inflows of 500 from performing loans. Assume the inflow cap is 75% of total gross outflows. Its HQLA stock is 800. What is the bank's LCR?
The LCR is 160%. Gross outflows are 1,000 million; inflows of 500 are under the 750 cap, so net outflows are 500 million. Dividing HQLA of 800 million by 500 million gives 160%, well above the 100% minimum.
- A80%
- B100%Correct
- C114%
- D160%
Explanation
Total outflows = 400 + 600 = 1,000. Inflows of 500 are below the cap of 75% x 1,000 = 750, so all count. Net outflows = 1,000 - 500 = 500. LCR = 800/500 = 160%? Check: this gives 160%, so the correct choice is 160%.
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