FRM Part II · FRM Exam Part II · Monitoring Liquidity
A bank's treasury team wants a daily early view of liquidity strain that complements its regulatory ratios. Which monitoring approach best serves this purpose?
High-frequency liquidity metrics, such as intraday usage, funding spreads and rollover rates, tracked against limits and triggers, give the earliest warning of strain. Annual statements, quarterly ratios and share price comparisons are too slow or too indirect to serve as daily monitoring tools.
- ATracking a set of high-frequency metrics such as intraday usage, funding spreads, and wholesale rollover rates against preset limits and triggersCorrect
- BReviewing the annual audited balance sheet for changes in total assets
- CRelying solely on the quarterly Net Stable Funding Ratio calculation
- DComparing the bank's share price with its peer group each month
Explanation
Liquidity monitoring tools are meant to be frequent and forward-looking, using metrics with limits and triggers that flag stress early. Annual or quarterly measures are too infrequent, and share price is only an indirect signal.
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