Skip to content

FRM Part II · FRM Exam Part II · Liquidity Risk Reporting and Stress Testing

A bank reports available unencumbered assets as defined in BCBS 144. It holds USD 500 million of securities, of which USD 200 million are pledged in repo transactions and USD 80 million are pledged to a central bank, and USD 60 million are not pledged but are not eligible for any central bank facility and cannot be monetized in secondary markets. Which figure should the bank report as available unencumbered assets, and how?

The reportable figure is USD 160 million. Unencumbered securities are 500 minus 200 minus 80, or 220 million, but the 60 million that is neither marketable as collateral nor central bank eligible does not qualify. Reporting should also give the assets' type, location and currency.

  1. AUSD 160 million, with the asset-level detail (eligibility and marketability) supplied separatelyCorrect
  2. BUSD 220 million, being the total after deducting repo pledges only
  3. CUSD 300 million, being the total less repo and central bank pledges
  4. DUSD 500 million, since all securities are on the balance sheet

Explanation

Unencumbered assets are those not pledged: 500 minus 200 minus 80 equals 220 million. The tool counts assets that are marketable as collateral in secondary markets or eligible for central bank standing facilities. The 60 million is neither, so it is excluded, leaving 160 million. The 220 million ignores the eligibility test and 300 deducts only repo pledges.

Did you get it right without looking?

One question tells you little. A timed set on Liquidity Risk Reporting and Stress Testing shows your real accuracy, how long you take and where you lose marks.

Practise Liquidity Risk Reporting and Stress TestingFree diagnostic mock

More Liquidity Risk Reporting and Stress Testing questions