FRM Part II · FRM Exam Part II · Managing Nondeposit Liabilities
A bank has USD 600 million of liquid assets and expects the following 30-day stressed outflows: USD 300 million wholesale funds maturing with a 100% run-off, USD 400 million of uninsured deposits with a 25% run-off, and USD 200 million of insured deposits with a 5% run-off. Inflows are USD 50 million. What is the 30-day net stressed outflow and the resulting liquidity coverage (liquid assets / net outflow)?
Gross outflows are 300 plus 100 plus 10, or 410 million. Subtracting 50 million of inflows gives net outflow of 360 million, so coverage is 600 divided by 360, about 1.67.
- ANet outflow USD 360 million; coverage 1.67
- BNet outflow USD 410 million; coverage 1.46Correct
- CNet outflow USD 460 million; coverage 1.30
- DNet outflow USD 410 million; coverage 1.67
Explanation
Outflows: 300 + 0.25×400 (100) + 0.05×200 (10) = 410 million. The problem gives inflows of 50, so net = 360 and coverage = 600/360 = 1.67. This matches the first option, not the one marked.
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