FRM Part II · FRM Exam Part II · Monitoring Liquidity
A bank's ASF is 900 and its RSF is 1,000. Management plans to close the gap by replacing 200 of short-term wholesale funding from financial institutions maturing in under six months (ASF factor 0%) with 200 of liabilities with residual maturity over one year (ASF factor 100%). Assuming RSF is unchanged, what is the resulting NSFR?
ASF rises by 200 because the replaced funding carried a 0% factor and the new funding carries 100%. ASF becomes 1,100 against RSF of 1,000, so the NSFR is 110%.
- A90%
- B100%
- C110%Correct
- D120%
Explanation
Replacing 200 of 0%-factor funding raises ASF by 200×100% = 200, from 900 to 1,100, since the replaced funding contributed nothing. NSFR = 1,100/1,000 = 110%. Taking the original 90% or assuming only a 100 gain would be wrong.
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