Skip to content

FRM Part II · FRM Exam Part II · The US Dollar Shortage in Global Banking and the International Policy Response

Which of the following remains a vulnerability in global dollar funding even after Basel III liquidity reforms?

Hidden off-balance-sheet dollar obligations from FX swaps and forwards remain a key vulnerability. They act like dollar debt but are not shown on balance sheets, so currency mismatches and rollover risks are harder to measure and monitor despite Basel III liquidity reforms.

  1. ALarge off-balance-sheet FX swap and forward dollar obligations that do not appear as debt on balance sheets and can be hard to measureCorrect
  2. BBanks being required to hold zero dollar assets
  3. CExcessive reliance on central bank swap lines having been eliminated by regulation
  4. DComplete transparency of non-US banks' dollar debt

Explanation

FX swaps and forwards are off-balance-sheet instruments, so dollar debt-like obligations are underreported and create hidden currency mismatches. The other options misstate the post-crisis position.

Did you get it right without looking?

One question tells you little. A timed set on The US Dollar Shortage in Global Banking and the International Policy Response shows your real accuracy, how long you take and where you lose marks.

Practise The US Dollar Shortage in Global Banking and the International Policy ResponseFree diagnostic mock

More The US Dollar Shortage in Global Banking and the International Policy Response questions