medium · Frm Part 2 Liquidity & Treasury Risk
A bank is evaluating its intraday liquidity for USD settlement. It notes that its USD LCR is 65%, while its aggregate LCR is 120%.
Which of the following best describes the 'supervisory gap'?
- The bank's USD LCR is only allowed to be low if its NSFR is above 150%.
- The USD LCR must be exactly equal to the aggregate LCR to be in compliance with Basel III.
- The aggregate ratio hides a significant currency-specific shortfall that may prevent the bank from meeting USD payment deadlines if the FX swap market freezes.
- The bank should convert all of its USD assets into EUR to improve its aggregate LCR.
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