Liquidity Contingency Funding Plan Workshop
46 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What significant event occurred to WaMu in September 2008?

  • WaMu's stock rose to over $50 per share
  • WaMu declared bankruptcy without external intervention
  • The FDIC seized WaMu and sold its assets to JPMorgan Chase (correct)
  • WaMu was acquired by Bank of America

    • What contributed to WaMu's stock peaking over $40 per share?

  • Aggressive expansion in mortgage lending (correct)
  • Cautious lending practices and risk management
  • A focus on commercial real estate investments
  • A decrease in subprime loan issuance

    • What was the total assets of WaMu at the time of its failure?

  • Approximately $188 billion
  • Approximately $307 billion (correct)
  • Approximately $1.9 billion
  • Approximately $40 billion

    • Which of the following factors was a primary cause of WaMu's collapse?

    <p>Rapid increase in subprime loan issuance</p> Signup and view all the answers

    What was WaMu's total deposits at the time it was seized?

    <p>Confidential information not disclosed</p> Signup and view all the answers

    What is the primary purpose of ensuring that a bank can meet its short-term obligations during financial disturbances?

    <p>To avoid disruptions in operations.</p> Signup and view all the answers

    How does a formal contingency funding plan (CFP) assist banks in managing liquidity issues?

    <p>By managing stress events and clarifying responsibilities.</p> Signup and view all the answers

    Which of the following is a benefit of maintaining adequate cash flow during adverse conditions?

    <p>Providing a cushion against unexpected market changes.</p> Signup and view all the answers

    What regulatory guidelines significantly impact liquidity requirements for banks?

    <p>Basel III liquidity standards.</p> Signup and view all the answers

    What role does BNM play in relation to liquidity regulations?

    <p>Regulating liquidity and addressing shortfalls.</p> Signup and view all the answers

    What is one of the primary objectives of the Liquidity Contingency Funding Plan (LCFP)?

    <p>To ensure procedures for fund access during emergencies</p> Signup and view all the answers

    Which committee is responsible for overseeing Liquidity Risk Management?

    <p>Board of Risk Committee (BRC)</p> Signup and view all the answers

    What role does the Chief Executive Officer (CEO) play in the Liquidity Management Committee (LMC)?

    <p>Chairperson of the committee</p> Signup and view all the answers

    What is required for a quorum in the Liquidity Management Committee (LMC)?

    <p>Majority of committee members above 50%</p> Signup and view all the answers

    Why is timely communication considered essential during a liquidity crisis?

    <p>To facilitate quick decision-making for the Bank</p> Signup and view all the answers

    What is a key aspect of the management of liquidity crises as stated in the objectives?

    <p>Clear roles and responsibility for personnel</p> Signup and view all the answers

    Which group is kept informed about liquidity crisis events for effective strategic decision making?

    <p>Board of Directors (BOD) and Board of Risk Committee (BRC)</p> Signup and view all the answers

    What aspect is essential for successfully implementing the Contingency Funding Plan?

    <p>Regular testing and updating for operational robustness</p> Signup and view all the answers

    What behavior do wholesale customers exhibit in response to anticipated interest rate hikes?

    <p>They transfer assets to short-dated deposits.</p> Signup and view all the answers

    What is the immediate consequence of the allegations made on social media regarding the Bank?

    <p>A decrease in the Bank's Liquidity Coverage Ratio (LCR).</p> Signup and view all the answers

    What regulatory action is being taken by the CEO in response to the declining liquidity conditions?

    <p>Invoking the Liquidity Crisis Framework Policy (LCFP).</p> Signup and view all the answers

    How much total have retail customers withdrawn in the past week?

    <p>RM2 billion.</p> Signup and view all the answers

    What is the primary purpose of formulating a communication action plan in this scenario?

    <p>To reassure customers of the Bank's financial stability.</p> Signup and view all the answers

    What is one strategy to manage fund utilization during a liquidity crisis?

    <p>Approve new financing selectively</p> Signup and view all the answers

    Which officer is primarily responsible for enforcing a stricter collection process?

    <p>Chief Collection &amp; Recovery Officer</p> Signup and view all the answers

    What action can be taken regarding unused financing lines during a liquidity crisis?

    <p>Reduce unused lines with customer agreement</p> Signup and view all the answers

    What is a potential action related to cash access for MEPS card holders?

    <p>Limit cash access for MEPS card holders</p> Signup and view all the answers

    Who is responsible for deciding on the execution of mitigation strategies outlined in the liquidity crisis plan?

    <p>Liquidity Management Committee</p> Signup and view all the answers

    What is a key purpose of selectively approving new financing during a liquidity crisis?

    <p>To reduce large fund utilization</p> Signup and view all the answers

    Which statement accurately describes a potential outcome of implementing a stricter collection process?

    <p>It may ensure continuation of cash inflow</p> Signup and view all the answers

    What role does the Chief Retail Banking Officer play in mitigating a liquidity crisis?

    <p>They are involved in reducing large fund utilization</p> Signup and view all the answers

    What event triggered the liquidity crisis for Silicon Valley Bank (SVB)?

    <p>An announcement to raise capital of $1.75 billion</p> Signup and view all the answers

    What largely contributed to the collapse of SVB despite its healthy liquidity indicators?

    <p>Concentration risk in wholesale deposits</p> Signup and view all the answers

    What risk did SVB face due to its asset composition during the liquidity crisis?

    <p>A high percentage of fixed-rate bonds</p> Signup and view all the answers

    What financial strategy did SVB employ to manage cash outflows and obligations?

    <p>Selling available-for-sale (AFS) securities</p> Signup and view all the answers

    What was a significant factor causing losses in SVB's available-for-sale (AFS) portfolio?

    <p>Drop in bond prices due to rising interest rates</p> Signup and view all the answers

    Which aspect of SVB's financial strategy left it vulnerable during the liquidity crisis?

    <p>Lack of hedging with floating swaps</p> Signup and view all the answers

    Which group of clients primarily contributed to the concentration risk faced by SVB?

    <p>US tech companies</p> Signup and view all the answers

    What was a consequence of the elevated client cash burn for SVB?

    <p>Pressure on balance of fund flows</p> Signup and view all the answers

    What significant asset change occurred at SVB from 2020 to 2022?

    <p>Increase in total assets from $85 billion to $216 billion</p> Signup and view all the answers

    What important lesson can be learned from SVB's liquidity crisis?

    <p>Diversifying client base is crucial</p> Signup and view all the answers

    Which regulatory action was taken against SVB during the crisis?

    <p>Placing under receivership by FDIC</p> Signup and view all the answers

    What role did the California Department of Financial Protection and Innovation play in SVB's crisis?

    <p>Seized SVB and placed it under receivership</p> Signup and view all the answers

    What does AFS stand for in the context of SVB's financial strategy?

    <p>Available-for-Sale</p> Signup and view all the answers

    During which period did SVB experience the most significant withdrawal of deposits?

    <p>March 2023</p> Signup and view all the answers

    What was a key challenge resulting from SVB's fixed-rate bonds?

    <p>They had rising costs of funding (COF)</p> Signup and view all the answers

    Study Notes

    Liquidity Contingency Funding Plan Workshop

    • Date: November 27, 2024
    • Presenters: Norhayati Masol, Mohd Sairi Mat Saidi, Mohd Rahmat Ngah
    • Workshop Focus: Market and Liquidity Risk
    • Target Audience: Bank Rakyat Only (Confidential)

    Workshop Content

    • Lesson Learn - Liquidity Crisis Past Events: Includes case studies of past liquidity crisis events
    • Introduction to Liquidity Contingency Funding Plan: Explains foundational concepts of liquidity contingency planning
    • Implementation of the Contingency Funding Plan: Details the practical steps in implementing a contingency funding plan
    • Components of a Liquidity Contingency Funding Plan: Covers the various components of a comprehensive contingency funding plan
    • Test Case: Case studies or scenarios for practical application of the concepts
    • Q&A Session: Open forum for questions and answers

    Silicon Valley Bank (SVB) Liquidity Crisis Event

    • Date: 8/3/2023 and 10/3/2023
    • Assets: $42 billion in bank assets
    • Capital Increase: $1.75 billion raised by SVB
    • Sale of AFS Portfolio: $21 billion, with a loss of $1.8 billion, -1.79% yield
    • FDIC Seizure and Receivership: Placed under the Federal Deposit Insurance Corporation's (FDIC) receivership

    SVB Financial Indicators

    • Asset Composition: 62% of assets are cash and high-quality fixed income securities.
    • Liquidity: Ample liquidity as a majority of securities are in USTs and government-sponsored enterprise securities.
    • Capital Ratios: Pro forma capital ratios well above regulatory minimums, targeting 7–8%.

    WaMu (Washington Mutual) Liquidity Crisis Event

    • Founding: Founded in 1889
    • Crisis: Subprime Mortgage Crisis of 2007-2008
    • Stock Peak: WaMu stock peaked at over $40 per share
    • Causes of collapse: Aggressive expansion into subprime mortgage lending, highly leveraged adjustable-rate mortgages, and interest-only loans during a period of high sub-prime mortgage issuance.
    • FDIC Seizure: FDIC seized assets and sold them to JPMorgan Chase for $1.9 billion.
    • Stock Plummet: WaMu stock price dropped by over 90%

    Government Intervention & FDIC's Role

    • FDIC Seizure: FDIC seized WaMu's assets.
    • J.P. Morgan Acquisition: JPMorgan Chase acquired WaMu for $1.9 billion.

    Contingency Funding Plan Definitions and Importance

    • Liquidity Contingency Funding Plan: A backup plan for banks to have access to funds during a crisis.
    • Importance in Financial Stability: Maintaining continuity during financial disturbances, enhancing trust, preventing liquidity crunches.

    Regulatory Context

    • Basel III: Liquidity standards impacting liquidity planning
    • BNM Policies: Policies (e.g., LCR, NSFR) related to liquidity risk.
    • Compliance Requirements: Formal contingency funding plan (CFP) for addressing liquidity shortfalls in emergencies, policies to manage stress events, lines of responsibility, and procedure, testing, and updating

    Objectives of the LMC

    • Procedure Management: Ensuring procedures to access funds in emergencies
    • Communication & Plan: Time and precise communication to facilitate the bank's quick decision-making
    • Roles & Responsibility: Clear roles and responsibilities for all personnel for the effective management of liquidity crises

    LCFP Process

    • Comprehensive Plan: The presentation details a very detailed and comprehensive methodology of the implementation of LCFP across a large range of situations for a bank, including analysis and monitoring, communication and reporting mechanisms, roles and responsibilities.

    Test Cases

    • Case Studies: The document has a number of detailed hypothetical examples to analyse the implementation of the LCFP.

    Key Lessons from Liquidity Contingency Funding Plan

    • Diversification of funding sources: Avoiding reliance just one source.
    • Importance of Preparation: Preparing for a wide range of potential stressors

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Related Documents

    Liquidity Contingency Funding Plan Workshop 2024 PDF

    Description

    Join the workshop on liquidity contingency funding plans focusing on market and liquidity risk. Learn from experts about past liquidity crises and discover the essential components for effective contingency planning. Participate in case studies and engage in a Q&A session tailored for Bank Rakyat members.

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser