Skip to content

FRM Part II · FRM Exam Part II · Early Warning Indicators

A bank sets a three-level EWI framework: green below 20% reliance on wholesale funding, amber 20%-30%, red above 30%. Wholesale funding is 270 of total funding 1,000 at the start of the quarter. During the quarter, wholesale funding grows by 60 and retail deposits grow by 40, with no other funding changes. Which statement is correct at quarter-end?

Wholesale funding rises to 330 and total funding to 1,100, so reliance is exactly 30.0%. Since the red threshold is above 30%, the indicator stays amber, though it sits right on the red boundary and merits close monitoring.

  1. AReliance is about 31.7%, so the indicator is redCorrect
  2. BReliance is 30.0%, so the indicator is amber
  3. CReliance is about 29.7%, so the indicator is amber
  4. DReliance is 33.0%, so the indicator is red

Explanation

Wholesale = 270 + 60 = 330. Total = 1,000 + 60 + 40 = 1,100. Ratio = 330/1,100 = 30.0%. Recheck: 330/1,100 = 0.30 exactly, which is not above 30%, so it is amber. The correct option is therefore the one stating 30.0% amber.

Did you get it right without looking?

One question tells you little. A timed set on Early Warning Indicators shows your real accuracy, how long you take and where you lose marks.

Practise Early Warning IndicatorsFree diagnostic mock

More Early Warning Indicators questions