CMA Final · Risk Management in Banking and Insurance · Liquidity Risk Management
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 1,400 crore and projected total cash inflows are Rs 500 crore. Assuming inflows are within the permitted cap, what is the Liquidity Coverage Ratio?
The LCR is 100%. Net stressed cash outflows over 30 days equal outflows of Rs 1,400 crore less inflows of Rs 500 crore, which is Rs 900 crore. Dividing HQLA of Rs 900 crore by this net outflow gives exactly 100%, the minimum requirement.
- A64.3%
- B100%Correct
- C180%
- Dexactly 150%
Explanation
Net cash outflows = 1,400 - 500 = Rs 900 crore. LCR = 900 / 900 = 100%. Using gross outflows of 1,400 gives 64.3%, which ignores the inflow deduction.
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