FRM Part I · FRM Exam Part I · Banks
Under Basel III, which of the following is a feature of the Liquidity Coverage Ratio requirement?
The Basel III LCR requires a bank to hold enough high-quality liquid assets to cover total net cash outflows over a 30-day stress scenario, meaning a ratio of at least 100%. The one-year stable funding concept belongs to the NSFR, not the LCR.
- ABanks must hold HQLA at least equal to net cash outflows over a 30-day stress periodCorrect
- BBanks must hold stable funding covering assets over a one-year horizon
- CBanks must hold capital equal to 8% of risk-weighted assets
- DBanks must hold HQLA equal to total deposits
Explanation
The LCR requires HQLA of at least 100% of total net cash outflows over 30 days of stress. The one-year horizon describes the NSFR. The 8% capital figure is a capital rule, not liquidity. Holding HQLA equal to all deposits is not required.
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