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FRM Part II · FRM Exam Part II · Monitoring Liquidity

A bank notices that its largest correspondent counterparty has begun delaying outgoing payments to the bank until late in the afternoon, whereas previously they arrived in the morning. Which intraday monitoring implication is most accurate?

Late receipts from a counterparty raise the bank's net debit earlier and for longer, increasing peak intraday liquidity usage. The bank should monitor receipt timing and may need a larger buffer, because end-of-day balances can look unchanged while intraday risk grows.

  1. AThe bank's intraday liquidity usage will likely rise earlier in the day, so it should monitor the timing of receipts and may need a larger bufferCorrect
  2. BThe change affects only end-of-day balances, so no intraday action is needed
  3. CGross payment volumes will fall, so intraday risk falls
  4. DThe bank's available intraday liquidity at the start of day automatically increases

Explanation

Delayed receipts mean outgoing payments are funded by the bank's own resources for longer, increasing net debit and peak usage. Timing of receipts matters even if end-of-day totals are unchanged. The other options ignore timing or are unsupported.

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