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Questions and Answers
What is the purpose of the Asset-Liability Management Committee (ALCO)?
What is the purpose of the Asset-Liability Management Committee (ALCO)?
- To implement the liquidity risk management strategy of the bank (correct)
- To evaluate the overall risks faced by the bank including credit risk
- To manage the operational risk of the bank
- To oversee the market risk of the bank
What is the difference between stock approach and flow approach in measuring liquidity risk?
What is the difference between stock approach and flow approach in measuring liquidity risk?
- Stock approach looks at the intrinsic liquidity profile of a bank, while flow approach is an indicator of past action
- Stock approach looks at the liquidity requirements of different time periods, while flow approach calculates ratios to compare to benchmarks
- Stock approach calculates ratios to compare to benchmarks, while flow approach looks at the liquidity requirements of different time periods (correct)
- Stock approach is used for on-balance sheet positions, while flow approach is used for off-balance sheet positions
What is the role of the Asset Liability Management (ALM) Support Group?
What is the role of the Asset Liability Management (ALM) Support Group?
- To report to the Board and evaluate overall risks faced by the bank
- To identify and define liquidity risk exposures for each major position
- To prepare forecasts and recommend action needed to maintain liquidity position (correct)
- To set the bank's explicit liquidity risk tolerance
