CMA Final · Risk Management in Banking and Insurance · Liquidity Risk Management
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 expected cash inflows are Rs 300 crore (inflows are below the permitted cap of 75% of outflows). What is the LCR?
The LCR is 110%. Net outflows over thirty days equal outflows of Rs 900 crore less inflows of Rs 300 crore, which is Rs 600 crore. Dividing HQLA of Rs 660 crore by Rs 600 crore gives 1.10, so the ratio is 110 percent.
- A73.3%
- B110%Correct
- C220%
- D88%
Explanation
Net cash outflow = 900 - 300 = Rs 600 crore. LCR = 660/600 = 110%. Using gross outflows gives 73.3%, which is wrong because inflows must be deducted to get net outflows.
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