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

A bank runs a 30-day combined stress scenario. Opening liquid assets (after haircuts) are USD 900 million. Stressed cash outflows are: retail deposit runoff USD 400 million, wholesale funding non-rollover USD 550 million, and drawdowns on committed lines USD 150 million. Stressed inflows are USD 300 million from maturing loans. Contingent actions (repo of unencumbered securities) can raise USD 120 million, but only after day 10. What is the bank's cumulative net liquidity position at day 30 including the contingent actions?

The cumulative net liquidity position at day 30 is USD 220 million. Net stressed outflows are 800 million (1,100 outflows less 300 inflows), leaving 100 million from the 900 million buffer, and the 120 million repo raised after day 10 is available by day 30.

  1. AUSD 220 million
  2. BUSD 100 millionCorrect
  3. CUSD -20 million
  4. DUSD 120 million

Explanation

Net outflow = 400+550+150-300 = 800 million. Opening 900 minus 800 = 100 million. The contingent 120 million is assumed executed by day 30, so position = 220 million. Check: 900-800+120 = 220. The 100 million option omits the contingent action, so the correct figure is 220 million.

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