Liquidity Risk
Domain focus
Liquidity risk questions test the LCR, NSFR, funding concentration, maturity mismatch, the contingency funding plan (CFP) and intraday liquidity.
Core rules
- LCR = high-quality liquid assets (HQLA) / net cash outflows over 30 calendar days; the minimum is 100%.
- HQLA is split into Level 1, Level 2A and Level 2B, with haircuts and caps (Level 2B is capped at 15% of HQLA).
- Cash-outflow rates vary: stable retail deposits around 5%, less stable retail around 10%, and wholesale funding higher. Inflows are capped at 75% of outflows.
- NSFR = available stable funding / required stable funding; the minimum is 100% and the horizon is one year.
- BNM expects a CFP, liquidity stress testing, funding concentration limits and board-level oversight.
Worked example
HQLA = RM800m; net cash outflows = RM640m. LCR = 800 / 640 = 125%. If the bank adds RM100m of Level 2B assets, the cap may prevent all of it counting, so the LCR does not rise by the full amount. The correct answer checks the 15% cap before recalculating.
Traps
Do not count all inflows. Do not treat all deposits as stable. Do not ignore the Level 2B cap. Do not use LCR factors for NSFR - the two frameworks use different factors. Do not treat the CFP as a document that never needs testing.