medium · Frm Part 2 Liquidity & Treasury Risk
A clearing bank has $3.0 billion in intraday capacity. Its largest counterparty provides $1.5 billion in payments, usually by 10:30 AM.
If that counterparty delays until 4:00 PM, and the bank has $2.0 billion in fixed obligations at 11:00 AM, what is the 'intraday stress' impact if its starting balance was zero?
- A $0.5 billion liquidity gap at 11:00 AM.
- The bank defaults at 4:00 PM when the counterparty finally pays.
- A $2.0 billion breach because the counterparty payment is the only source of funds.
- The bank remains liquid because the $2.0 billion obligation is within its $3.0 billion capacity.
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