35 Questions
What does ALM stand for in the banking sector?
Asset Liability Management
Which of the following is NOT considered a fundamental pillar of the banking business?
Technology
Which of the risks below is NOT specifically mentioned as a financial risk that a financial institution may face?
Market risk
In the banking sector, which risks are considered structural risks in the balance sheet of an institution?
Interest rate risk and Liquidity risk
What does ALCO stand for in the context of the banking sector?
Asset Liability Committee
What is one of the financial risks that may arise due to changes in interest rates according to the text?
Interest rate risk
What percentage of deposits is a company with a simple relationship with the bank supposed to withdraw in a liquidity stress test?
75%
In a liquidity stress test, what percentage of deposits is a company with an operating relationship with the bank supposed to withdraw?
25%
What is the main purpose of Basel III in relation to banks and their customers?
To increase 'linkage' by encouraging banks to offer a variety of services
Who is in charge of proposing exposure limits to the entity's balance sheet risks?
The ALCO Support Group
Which group is responsible for monitoring and controlling compliance with decisions adopted within ALCO?
The ALCO Support Group
What does the ALCO Support Group periodically report to the Committee on?
The implementation of agreements adopted within ALCO
What is the aim of the liquidity stress test in Basel III?
To encourage banks to take a more cautious approach during systemic crises
What defines an asset as High-Quality Liquid Asset (HQLA) according to Basel III?
It can be sold without affecting market price significantly.
How do liquidity stress tests in Basel III make assumptions about the withdrawal of deposits during a 30-day stress situation?
By considering contractual withdrawals from credit rating downgrades
What factor leads to increased collateral requirements during liquidity stress tests?
Increased market volatility
Why do liquidity stress tests provide different percentages of withdrawal for different types of investors?
Due to variations in investor risk profiles and behaviors
What is the main purpose of ALCO (Asset and Liability Management Committee) in the banking sector?
To monitor and manage risks related to assets and liabilities
What is one of the key objectives that should be defined by the Management Board in relation to liquidity risk?
Implementing a mechanism for liquidity measurement
In liquidity management, what is the retail channel primarily associated with?
Capturing liabilities in the commercial network
What ratio aims to measure how long a financial institution could endure without a liquidity deficit in stress scenarios?
Survival horizon ratio
What is the primary focus of ALCO (Asset and Liability Committee) in the banking sector?
Monitoring and managing balance sheet risks
Which financing channel allows financial institutions to access capital markets for short-, medium-, and long-term bond issues?
Wholesale channel
In a liquidity stress test, what does the survival horizon ratio measure?
Duration without a liquidity deficit in stress scenarios
What is the formula to calculate liquidity risk in the context described?
RISK = EXPOSURE x VARIABILITY x INTENSITY
How are the expected cash flows treated in the liquidity risk analysis?
Only cash flows sensitive to interest rate movements are considered.
What does liquidity risk in banking arise from?
Differential between short-term maturing liabilities and assets
How is liquidity risk exposed in the context of liquidity stress tests?
When short-term maturing liabilities exceed maturing assets
In liquidity stress tests, what does the analysis horizon usually refer to?
Duration for distributing sensitive balance by revision or maturity date
What is the primary objective of calculating the variation in the financial margin in the context provided?
To measure the impact of parallel yield curve variations
What is the significance of the survival horizon in liquidity stress tests?
It aims to measure how long a financial institution could endure without a liquidity deficit in stress scenarios.
Why do liquidity stress tests provide different percentages of withdrawal for different types of investors?
To account for the varying behaviors and withdrawal patterns of different types of investors during stress scenarios.
What does ALCO (Asset and Liability Committee) in the banking sector primarily focus on?
ALCO is responsible for proposing exposure limits to the entity's balance sheet risks.
How does market volatility impact the repayment of loans in liquidity stress tests?
Market volatility can lead to increased collateral requirements during liquidity stress tests.
What is the aim of liquidity stress tests in Basel III?
The aim is to make assumptions about the withdrawal of deposits during stress scenarios.
Test your knowledge on the relationship between Basel III regulations and banks by understanding withdrawal percentages based on types of relationships. Explore the impact of Basel III in creating greater connectivity within the banking sector.
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