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FRM Part II · FRM Exam Part II · Contingency Funding Planning

Which of the following best distinguishes a contingency funding plan from the bank's day-to-day liquidity management?

A CFP covers how the bank will act when liquidity is stressed, including funding sources, governance and communication. Day-to-day liquidity management runs the normal funding and limits process. The distinction is about conditions, not currency, authorship or which side of the balance sheet is addressed.

  1. AThe CFP applies only to foreign currency liquidity, while day-to-day management covers domestic currency
  2. BThe CFP is prepared by regulators, while day-to-day management is done by the bank
  3. CThe CFP covers only the bank's assets, while day-to-day management covers only liabilities
  4. DThe CFP addresses actions under adverse or stressed conditions, including funding sources and communication, whereas day-to-day management operates under normal conditionsCorrect

Explanation

The CFP is the stress-time playbook, covering actions, funding sources, governance and communications. Day-to-day management handles ordinary funding and limits. The other options invent distinctions by currency, author or balance sheet side.

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