FRM Part II · FRM Exam Part II · Early Warning Indicators
A bank sets an amber trigger for its three-month wholesale funding rollover rate at 85% and a red trigger at 70%. This month, $400 million of wholesale funding matured and $300 million was rolled over. What is the rollover rate and the resulting signal?
The rollover rate is 300 divided by 400, or 75%. That is below the 85% amber threshold but above the 70% red threshold, so the indicator is amber and should prompt escalation and closer monitoring.
- A75%, amberCorrect
- B75%, red
- C133%, no trigger
- D25%, red
Explanation
Rollover rate = 300/400 = 75%. This is below the amber trigger of 85% but above the red trigger of 70%, so the signal is amber. Labelling it red ignores that 75% exceeds 70%. 25% is the non-rolled share, the wrong base.
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