Skip to content

FRM Part II · FRM Exam Part II · Liquidity and Reserves Management: Strategies and Policies

A bank's intraday liquidity monitoring shows the following net cumulative positions (inflows minus outflows) during the day, in millions: 09:00 -40, 11:00 -120, 13:00 -90, 15:00 -210, 17:00 -60. The bank starts the day with zero balance at the central bank and has 150 million of available intraday credit. Which conclusion is correct?

The peak cumulative net outflow is 210 million at 15:00, which exceeds the 150 million of available intraday credit by 60 million. Late recovery to -60 is irrelevant because the liquidity must be available at the moment the peak occurs, so the bank needs more sources or re-timed payments.

  1. AThe maximum daily usage is 210 million, exceeding available credit by 60 million, so the bank needs extra sources or should re-time paymentsCorrect
  2. BThe maximum usage is 60 million, which is within available credit
  3. CThe maximum usage is 120 million, so the bank is fully covered
  4. DThe maximum usage is 210 million, but it is covered because the position recovers to -60 by close

Explanation

Peak intraday usage is the largest cumulative net negative position, 210 million at 15:00. Available credit is 150 million, leaving a 60 million shortfall. Recovery by the end of the day does not remove the intraday shortfall.

Did you get it right without looking?

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

Practise Liquidity and Reserves Management: Strategies and PoliciesFree diagnostic mock

More Liquidity and Reserves Management: Strategies and Policies questions