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FRM Part II · FRM Exam Part II · Intraday Liquidity Risk Management

A bank wants to implement the principle that it should have the ability to identify and prioritise time-specific obligations. Which of the following is the best example of a time-specific obligation that management should be able to prioritise on a stressed day?

A CCP intraday margin call due by a set time is a time-specific obligation, since failure to pay on time causes financial or reputational harm. Discretionary, internal or flexible-timing payments can be deferred, so they are not time-critical in the sense the principle intends.

  1. AA discretionary payment to an affiliate for a routine intragroup service fee with no deadline
  2. BA payment to a central counterparty for an intraday margin call that must be met by a set timeCorrect
  3. CAn internal transfer between two of the bank's own accounts
  4. DA planned purchase of securities for the bank's investment portfolio with flexible timing

Explanation

Time-specific obligations are those that must be settled by a particular time to avoid financial or reputational damage, such as CCP intraday margin calls, securities settlement deadlines, or payments tied to CLS. Discretionary or flexible payments can be delayed, and internal transfers do not create external liquidity needs. Prioritising the margin call protects the bank's access to critical services.

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