FRM Part II · FRM Exam Part II · Intraday Liquidity Risk Management
A bank reports the Basel monitoring tool 'intraday throughput' as the percentage of outgoing payments settled by specified times. Over several weeks, the bank's share of payments settled by 11:00 falls from 45% to 20%, while total daily payment value is unchanged and maximum usage is stable. Which interpretation and action is most appropriate?
The drop in early-day throughput suggests payments are being delayed, possibly due to liquidity strain or dependence on incoming receipts, which can pass stress to counterparties. Management should investigate causes and review payment-timing policies, since stable maximum usage does not capture this behavior.
- ANo concern, because stable usage means timing is irrelevant to risk
- BPayments are being delayed later in the day, which may signal liquidity strain or reliance on incoming receipts and can transmit stress to counterparties; investigate causes and review payment-timing policiesCorrect
- CThroughput decline shows reduced operational risk since fewer payments occur early
- DThe bank should increase its daily maximum usage limit to match the new pattern
Explanation
Later settlement indicates the bank may be deferring payments, possibly to conserve liquidity or await receipts, which can cause gridlock and affect counterparties. Stable maximum usage does not rule this out because timing matters independently. Raising limits or treating it as benign ignores the signal.
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