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FRM Part II · FRM Exam Part II · Liquidity Risk Reporting and Stress Testing

A bank's contractual maturity ladder shows, for the overnight to 1-week bucket, contractual inflows of USD 400 million and contractual outflows of USD 650 million. For the 1-week to 1-month bucket, inflows are USD 900 million and outflows are USD 800 million. Under the BCBS 144 contractual maturity mismatch tool, what are the gap and the cumulative gap at the end of the 1-month bucket?

The first bucket gap is inflows minus outflows, 400 minus 650, or -250 million. The second bucket gap is +100 million. The cumulative gap is the sum, -150 million, so the bank has a net contractual funding need through one month.

  1. AGap -250 million in first bucket; cumulative -150 millionCorrect
  2. BGap -250 million in first bucket; cumulative +100 million
  3. CGap +250 million in first bucket; cumulative +350 million
  4. DGap -250 million in first bucket; cumulative -1,050 million

Explanation

Gap in the first bucket is 400 - 650 = -250. Second bucket gap is 900 - 800 = +100. Cumulative gap is -250 + 100 = -150. Reporting only the second bucket gives +100, which ignores the first bucket's shortfall.

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