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FRM Part II · FRM Exam Part II · Managing Nondeposit Liabilities

Which statement about Eurodollar deposits used by banks as a funding source is correct?

Eurodollar deposits are US dollar deposits held at banks outside the United States, and they are generally free of US reserve requirements. They are not euro-denominated and do not carry FDIC insurance, which makes them a wholesale market funding source.

  1. AThey are US dollar deposits held at banks outside the United States, and so are generally not subject to US reserve requirementsCorrect
  2. BThey are euro-denominated deposits held only at US banks
  3. CThey are fully insured by the FDIC regardless of the location of the bank
  4. DThey are always callable on demand at the depositor's option at par

Explanation

Eurodollars are dollar-denominated deposits booked outside the US, typically at non-US banks or foreign branches, and are not subject to US reserve requirements. They are not euro-denominated and are not covered by FDIC insurance.

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