2016-FRR Exam Dumps | Which of the following bank events could stress the bank's liquidity position? I. Maturing of bank debt

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GARP.2016-FRR.v2024-09-09.q145
Question 132

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Question 132/145

Which of the following bank events could stress the bank's liquidity position?
I. Maturing of bank debt
II. Repurchase agreements
III. Futures margins
IV. Staff turnover

A. I, II

B. IV

C. III, IV

D. I, II and III

Correct Answer: D

Several bank events can stress the bank's liquidity position, including:
I: Maturing of Bank Debt: When a bank's debt matures, it must repay the principal amount. If the bank does not have sufficient liquid assets to meet this obligation, it can cause significant liquidity stress.
II: Repurchase Agreements (Repos): These are short-term borrowing agreements where the bank sells securities with an agreement to repurchase them at a higher price. If the market conditions change or the counterparty demands early repayment, it can put pressure on the bank's liquidity.
III: Futures Margins: Banks engaging in futures contracts must maintain margin accounts. If the market moves unfavorably, the bank might need to post additional margin, causing a liquidity crunch.
References: These factors are consistent with the descriptions provided in the "How Finance Works" document, which outlines the various events that can impact a bank's liquidity position.

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