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

A bank's treasury team is cataloguing the sources of intraday liquidity available to it on a normal business day. Which of the following is correctly classified as a source of intraday liquidity?

Incoming payments received from other payment system participants are a source of intraday liquidity, along with central bank balances, intraday credit and unencumbered collateral. Payments made for correspondent customers, extending credit to clients and pre-funding settlements are all uses that drain liquidity.

  1. APayments the bank makes on behalf of its correspondent banking customers
  2. BIncoming payments received from other banks' payment system participantsCorrect
  3. CReleasing intraday credit lines extended by the bank to its own clients
  4. DFunding a client's securities settlement obligation before receiving cover

Explanation

Sources of intraday liquidity include balances at the central bank, intraday credit lines, collateral that can be pledged, and payments received from other participants. Outgoing payments, extending credit to clients and pre-funding settlement are uses that consume liquidity.

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