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FRM Part II · FRM Exam Part II · Liquidity Risk Reporting and Stress Testing

A treasurer notices that a bank's LCR is comfortably above 100%, yet intraday payment delays occurred twice this month. Which reporting enhancement BEST addresses the gap?

The best enhancement is adding intraday liquidity monitoring metrics, such as peak daily usage, available intraday sources, and timing of critical payments. The LCR covers a 30-day stress horizon and cannot reveal intraday timing mismatches, so a high LCR can coexist with payment delays.

  1. AReplace the LCR with a longer-term funding ratio only
  2. BAdd intraday liquidity monitoring metrics, such as peak daily usage, available intraday sources, and time-specific payments, to regular reportingCorrect
  3. CReport the LCR weekly instead of daily to reduce noise
  4. DIncrease the haircuts on HQLA in the LCR calculation

Explanation

The LCR measures 30-day stressed coverage and does not capture intraday timing mismatches. Intraday metrics such as peak usage, available intraday liquidity, and timing of critical payments fill this gap. Replacing or slowing the LCR removes information, and changing haircuts does not address intraday timing.

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