FRM Part I · FRM Exam Part I · Banks
Which funding source would a bank regulator generally view as the LEAST stable under the liquidity framework's stress assumptions?
Unsecured wholesale funding from financial institutions maturing within 30 days is least stable. In stress it is assumed to run off almost entirely and is given a low stable-funding weight, unlike insured retail deposits, long-term debt, or capital.
- ARetail deposits fully covered by deposit insurance
- BLong-term debt with remaining maturity over one year
- CUnsecured wholesale funding from financial institutions maturing within 30 daysCorrect
- DTier 1 regulatory capital
Explanation
Short-term unsecured wholesale funding from financial counterparties is assumed to run off at very high rates in stress, and receives a low ASF factor. Insured retail deposits, long-term debt and capital are treated as stable.
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