P2.T8.20.8. Intraday liquidity risk management (Venkat Ch4)

Nicole Seaman

Director of FRM Operations
Staff member
Learning objectives: Identify and explain the uses and sources of intraday liquidity. Discuss the governance structure of intraday liquidity risk management. Differentiate between methods for tracking intraday flows and monitoring risk levels.


20.8.1. Which of the following is a USE of intraday liquidity?

a. Income funds flow
b. Term repo (as the repo seller)
c. Funding of nostro accounts (at correspondent bank outside home market)
d. Intraday credit (Federal Reserve unsecured committed line of credit, LOC)

20.8.2. Venkat explains that "all risk management frameworks start with a governance structure that defines the roles and responsibilities of various bank employees and committees in overseeing risk-related activities," and effective governance includes the oversight of intraday liquidity risk. In regard to the governance structure of intraday liquidity risk management which of the following statements is TRUE?

a. Intraday liquidity risk should be accepted as a cost of doing business
b. Roles and responsibilities should be defined within the eight lines (i.e., two times four) of defense model
c. PCS Systems should only be a source of funds; if PCS becomes a use of funds, then a yellow flag should be triggered
d. Intraday liquidity risk should be incorporated in the risk taxonomy and is a component of risk self-assessment including settlement risks

20.8.3. Each of the following is a measure for quantifying and/or monitoring risk levels EXCEPT which is a measure for understanding intraday flows?

a. Total payments
b. Client intraday credit usage
c. Intraday credit relative to tier 1 capital
d. Daily maximum intraday liquidity usage