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

A bank's treasurer is reviewing the bank's intraday liquidity framework against the BCBS monitoring tools and principles. Which of the following best describes the primary purpose of the bank's intraday liquidity risk management, as opposed to its end-of-day liquidity management?

The main purpose is to ensure the bank can meet its payment and settlement obligations on time during the business day, in both normal and stressed conditions. A 30-day survival horizon relates to the LCR, while margin and fee objectives are commercial goals rather than intraday liquidity risk management.

  1. AEnsuring the bank can meet payment and settlement obligations on time under both normal and stressed conditions during the business dayCorrect
  2. BEnsuring the bank holds enough high-quality liquid assets to survive a 30-day stress scenario
  3. CMinimizing the bank's net interest margin by lending out excess reserves overnight
  4. DMaximizing the bank's share of payment system volumes to earn fee income

Explanation

Intraday liquidity risk management focuses on the bank's ability to meet payment and settlement obligations when they fall due during the day, in normal and stressed conditions. The 30-day horizon relates to the LCR, a different tool. Net interest margin and fee income are profitability objectives, not the purpose of this framework.

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