FRM Part II · FRM Exam Part II · Contingency Funding Planning
A mid-sized bank is drafting its contingency funding plan (CFP). The Treasurer proposes that, during a liquidity stress event, decision authority should be left to whichever senior manager is available, so as to keep the response flexible. Which governance feature best addresses the weakness in this proposal?
A formally designated crisis management team with defined membership, roles and decision authority fixes the weakness. Contingency funding plans need clear accountability and escalation so decisions are fast and coordinated in stress. Ad hoc authority by whoever is available causes delay, confusion and inconsistent actions.
- AA formally designated crisis management team with defined membership, roles and decision authorityCorrect
- BA larger buffer of unencumbered liquid assets held by the treasury desk
- CA policy stating that the CFP is reviewed only after an actual crisis occurs
- DA rule that all funding decisions during stress be made by the business lines that generate the assets
Explanation
Effective CFP governance requires clearly assigned responsibilities, including a crisis team with defined membership and authority, so that decisions are timely and accountable. Ad hoc authority creates confusion and delay. A larger buffer helps resilience but does not fix the decision-making gap, and reviewing only after a crisis defeats the plan's purpose.
Did you get it right without looking?
One question tells you little. A timed set on Contingency Funding Planning shows your real accuracy, how long you take and where you lose marks.
More Contingency Funding Planning questions
- During a stress event, a bank's CFP activates a crisis management team (CMT). Which feature best reflects good practice for the design of th…
- A bank's CFP names an internal committee to approve use of contingent funding sources in a crisis. A review finds that (1) the plan lists ce…
- A bank's treasurer is reviewing which assets to count as part of the liquidity buffer that supports its contingency funding plan (CFP) durin…
- A bank's CFP stress scenario shows a 30-day cumulative net cash outflow before mitigating actions of USD 900 million. Existing liquid assets…
- A bank's internal audit reviews its CFP and finds that the crisis team members' contact lists are current, but no simulation involving the b…
- A bank's CFP has detailed stress scenarios and a list of contingent funding sources, but it does not name who convenes the crisis team, who …