FRM Part II · FRM Exam Part II · Intraday Liquidity Risk Management
Which of the following is a use of intraday liquidity for a bank that provides settlement services to clients?
Funding clients' payments and settlements before the clients' own funds arrive is a use of intraday liquidity, because the bank's own resources cover the gap. Incoming payments and collateral pledged to raise credit capacity increase sources instead.
- AReceipt of securities settlement proceeds from the central securities depository
- BPledging additional collateral to raise the intraday credit limit
- CFunding clients' payments and settlement obligations on their behalf before receiving their fundsCorrect
- DReceiving incoming payments from other direct participants
Explanation
Making payments for clients ahead of receiving their funds consumes the bank's own liquidity, so it is a use. The other options are inflows or actions that increase sources.
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