FRM Part II · FRM Exam Part II · Contingency Funding Planning
During a market-wide liquidity event, a bank's crisis team finds that the treasury, legal and communications functions are issuing inconsistent messages to counterparties and rating agencies. Which CFP element was most likely deficient?
The communication plan was deficient. A sound CFP assigns spokespeople, approved messages and stakeholder responsibilities so counterparties, regulators and rating agencies receive consistent information. Inconsistent messages from treasury, legal and communications indicate that this element was missing or poorly executed, rather than a quantitative or collateral issue.
- AThe haircut schedule applied to central bank collateral
- BThe contingency funding source ranking by cost
- CThe communication plan with defined spokespeople, messages and stakeholder responsibilitiesCorrect
- DThe calculation of the liquidity coverage ratio
Explanation
A CFP should include a communication strategy that identifies who speaks to which stakeholders (regulators, investors, rating agencies, depositors, employees) and ensures consistent messages. Inconsistent messaging points to a deficiency there, not to collateral haircuts, funding cost ranking or ratio calculation.
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