CMA Final · Risk Management in Banking and Insurance · Liquidity Risk Management
Which of the following is a recognised liquidity risk monitoring tool rather than a stock of liquid assets under Basel III?
Concentration of funding by counterparty is a Basel III liquidity monitoring tool. It shows reliance on a few funding sources. Central bank cash, Level 1 sovereign securities and Level 2A covered bonds are instead constituents of the HQLA stock used in the LCR.
- ALevel 1 sovereign securities
- BCash held at the central bank
- CConcentration of funding by counterpartyCorrect
- DLevel 2A covered bonds
Explanation
Basel III monitoring tools include contractual maturity mismatch, funding concentration, available unencumbered assets and market-related indicators. Level 1, central bank cash and Level 2A items are all components of HQLA, not monitoring tools.
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