Module: | Stress Scenarios & Monitoring Tools
Q11: In the LCR stress scenario, how are "Downgrade Triggers" and "Collateral Substitution" treated?
✅ Correct Answer: B
A key idea tested in Liquidity Coverage Ratio (LCR) relates to contingent liabilities.
The stress scenario mandates assuming a 3-notch credit rating downgrade, triggering 100 percent outflow of required additional collateral.
Similarly, if collateral substitution to non-HQLA assets is possible without bank consent, it contributes significantly to Net Cash Outflows.
The stress scenario mandates assuming a 3-notch credit rating downgrade, triggering 100 percent outflow of required additional collateral.
Similarly, if collateral substitution to non-HQLA assets is possible without bank consent, it contributes significantly to Net Cash Outflows.