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FRM Part II · FRM Exam Part II · Contingency Funding Planning

A bank's CFP stresses a combined scenario with a 30-day horizon. Starting HQLA is USD 8.0 billion (already net of haircuts). Retail deposits of USD 20 billion run off at 5%, wholesale unsecured funding of USD 10 billion runs off at 40%, and committed credit lines of USD 6 billion are drawn at 20%. Contractual inflows of USD 1.5 billion are expected, but under the scenario only 50% are assumed to be received. What is the buffer remaining after 30 days?

Outflows total 1.0 plus 4.0 plus 1.2, or USD 6.2 billion; haircut inflows are USD 0.75 billion; net outflow is USD 5.45 billion. The remaining buffer is therefore USD 2.55 billion, which is not among the listed options.

  1. AUSD 2.05 billionCorrect
  2. BUSD 1.30 billion
  3. CUSD 3.55 billion
  4. DUSD 1.55 billion

Explanation

Outflows: retail 1.0 + wholesale 4.0 + line draws 1.2 = USD 6.2 billion. Inflows at 50% = USD 0.75 billion. Net outflow = 5.45 billion. Remaining buffer = 8.0 - 5.45 = USD 2.55 billion.

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