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

A bank's available stable funding (ASF) comes from: Tier 1 capital USD 80 million (100% factor), stable retail deposits USD 400 million (95% factor), and wholesale funding from non-financial corporates with maturity under one year USD 300 million (50% factor). Its required stable funding (RSF) is USD 700 million. What is the NSFR and does the bank comply?

Available stable funding is 80 plus 380 plus 150, which equals USD 610 million. Dividing by required stable funding of USD 700 million gives an NSFR of 87.1%, below the 100% minimum, so the bank does not comply.

  1. AASF 650; NSFR 92.9%; non-compliant
  2. BASF 610; NSFR 87.1%; non-compliantCorrect
  3. CASF 610; NSFR 100%; compliant
  4. DASF 780; NSFR 111.4%; compliant

Explanation

ASF = 80×1.00 + 400×0.95 + 300×0.50 = 80 + 380 + 150 = 610. NSFR = 610/700 = 87.1%, below the 100% minimum, so non-compliant. Option D ignores the factors and simply sums balances.

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