CRO Liquidity Risk Management 2

Question 1

The Net Stable Funding Ratio (NSFR) requires that:

Accepted Answer

Available stable funding exceeds required stable funding over a 1-year horizon

Answer

The NSFR requires that Available Stable Funding (ASF) exceeds Required Stable Funding (RSF) over a one-year horizon, promoting durable long-term funding structures.

Question 2

A 'cash flow gap' analysis in liquidity management measures:

Accepted Answer

The mismatch between cash inflows and outflows across time buckets

Answer

Cash flow gap analysis identifies the mismatch between expected cash inflows and outflows across different time buckets, highlighting periods of potential liquidity shortfall.

Question 3

Which of the following BEST describes 'contingent liquidity risk'?

Accepted Answer

Liquidity risk arising from contractually committed but undrawn credit lines

Answer

Contingent liquidity risk arises from obligations that may not materialize under normal conditions but could trigger significant cash outflows under stress, such as undrawn credit facilities or financial guarantees.

Question 4

What is the primary purpose of an institution's Contingency Funding Plan (CFP)?

Accepted Answer

To provide a documented strategy for managing severe liquidity stress events

Answer

A Contingency Funding Plan (CFP) outlines pre-established strategies, procedures, and responsibilities for managing severe liquidity stress situations, including identifying backup funding sources.

Question 5

When calculating the Liquidity Coverage Ratio (LCR), which of the following represents a cash OUTFLOW?

Accepted Answer

Run-off of retail deposits under stress assumptions

Answer

Under LCR calculations, retail deposit run-offs are modeled as cash outflows, with regulatory run-off rates applied to different deposit categories based on their stability characteristics.

(CRO) Chief Risk Officer Certification Practice Test

(CRO) Chief Risk Officer Certification Practice Test

CRO Liquidity Risk Management 2