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FRM Part II · FRM Exam Part II · Contingency Funding Planning

A bank projects a 30-day stressed cumulative net cash outflow of USD 480 million. Its unencumbered liquid assets after haircuts total USD 300 million. The CFP lists these contingent sources with expected availability within 30 days: central bank facility against eligible collateral of USD 100 million (after haircut, already included in the USD 300 million), committed credit line of USD 60 million, and sale of a loan portfolio yielding USD 90 million after discount. Ignoring other flows, what is the surplus or shortfall after using all listed sources, counting each only once?

There is a shortfall of USD 30 million. Resources are 300 million of liquid assets plus the 60 million credit line and 90 million loan sale, totaling 450 million; the central bank amount is already within the 300 million. Against 480 million of outflows, the gap is 30 million.

  1. AShortfall of USD 30 millionCorrect
  2. BShortfall of USD 90 million
  3. CSurplus of USD 60 million
  4. DShortfall of USD 120 million

Explanation

The central bank amount is already inside the USD 300 million, so it is not added again. Total resources = 300 + 60 + 90 = 450. Net position = 450 - 480 = -30, a shortfall of USD 30 million. Double counting the 100 would give a surplus of USD 70 million, which is wrong.

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