Skip to content

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

A bank's payments desk notices that a large counterparty is delaying its outgoing payments to the bank until late in the afternoon. Which is the most direct effect on the bank's intraday liquidity position?

Delayed incoming payments remove an expected source of liquidity during the day, so the bank must lean more on its reserves or intraday credit to fund its own outgoing payments. The end-of-day position is unchanged if the payments arrive eventually.

  1. AIts available sources are reduced earlier in the day, increasing reliance on reserves or borrowed intraday creditCorrect
  2. BIts total end-of-day net position is permanently reduced
  3. CIts uses of liquidity fall because fewer payments settle
  4. DIts collateral haircuts at the central bank rise automatically

Explanation

Delayed incoming payments mean the expected inflows are not available to fund outgoing payments, so the bank must draw on reserves or intraday credit sooner. The delay does not change the end-of-day net position if payments arrive eventually, and it does not reduce the bank's own uses or alter haircuts.

Did you get it right without looking?

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

Practise Intraday Liquidity Risk ManagementFree diagnostic mock

More Intraday Liquidity Risk Management questions