Skip to content

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

A bank's contingency funding plan lists these stressed 30-day cash flows (USD million): retail deposit outflows 120; wholesale unsecured maturities not rolled 200; drawdowns on committed credit lines 80; inflows from maturing loans 90 (assumed fully received). Liquid assets available for sale or repo are USD 400 million at market value, with a 10% average haircut when monetized. Further, the bank can raise USD 50 million from selling a non-core business line, but only after 60 days. What is the 30-day net liquidity surplus under the plan?

The surplus is USD 50 million, but this does not match the listed options, so the question is flawed.

  1. AUSD 80 millionCorrect
  2. BUSD 130 million
  3. CUSD 70 million
  4. DUSD 10 million

Explanation

Outflows = 120 + 200 + 80 = 400. Net outflow after inflows = 400 - 90 = 310. Monetizable liquid assets = 400 x 0.90 = 360. Surplus = 360 - 310 = 50. Recompute: 360 - 310 = 50, so the stated option must be checked against the choices: none equals 50 except none.

Did you get it right without looking?

One question tells you little. A timed set on Liquidity Risk Management shows your real accuracy, how long you take and where you lose marks.

Practise Liquidity Risk ManagementFree diagnostic mock

More Liquidity Risk Management questions