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CS Professional · IFSCA - Regulations, Listing and Compliances · Banking Services and Finance Companies in IFSC

An IBU of Tapti Bank finds that its liquid foreign currency assets are falling. Its risk head wants to apply a supervisory framework to measure short-term liquidity resilience. Which measure is the Basel standard relevant to this concern?

The Liquidity Coverage Ratio is the relevant Basel measure. It requires a bank to hold enough high-quality liquid assets to cover its net cash outflows over a 30-day stress period, which directly addresses the IBU's worry about short-term liquidity resilience.

  1. ALiquidity Coverage Ratio, requiring high-quality liquid assets to cover net cash outflows over a 30-day stress periodCorrect
  2. BLeverage ratio, measuring tier 1 capital against total rupee deposits only
  3. CCapital conservation buffer, restricting dividends on equity of the IBU
  4. DCountercyclical buffer, requiring extra equity during credit expansion

Explanation

The Liquidity Coverage Ratio ensures enough high-quality liquid assets to meet net outflows in a 30-day stress scenario, matching the concern about short-term liquidity. The other measures address capital, not short-term liquidity.

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