medium · FRM Part 2 Liquidity & Treasury Risk
A bank's 'Maximum Net Cumulative Debit' during the day was $12 bn. Its opening balance was $4 bn and its daylight credit line was $6 bn. During the peak, it missed a $3 bn payment.
What should the supervisor conclude about the bank's intraday management?
- The bank should be penalized for having an LCR below 100% during the specific 11:00 AM intraday liquidity monitoring window used by prudential bank regulators.
- The bank is in full regulatory compliance because its $3 bn missed payment is smaller in size than its $4 bn opening cash balance held at the very start of the business day.
- The bank's NSFR is likely far too high, causing it to hold too much long-term 'Available Stable Funding' in illiquid assets that cannot easily be mobilized to cover intraday debits.
- The bank failed to maintain sufficient intraday capacity (Shortfall = $12bn - [$4bn + $6bn] = $2bn), leading to the missed obligation.
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