Module: | Run-off Rates & Cash Outflows/Inflows
Q8: A bank pledges a deposit to secure a loan. Under what conditions can this pledged deposit be EXCLUDED from LCR outflows?
✅ Correct Answer: B
From the Liquidity Coverage Ratio (LCR) syllabus perspective, this concept highlights the treatment of encumbered deposits.
A pledged deposit is excluded from outflows only if the associated loan does not settle within the 30-day window and the pledge is legally binding.
This prevents the double counting of liquidity risks within the Basel III Liquidity Standards framework.
A pledged deposit is excluded from outflows only if the associated loan does not settle within the 30-day window and the pledge is legally binding.
This prevents the double counting of liquidity risks within the Basel III Liquidity Standards framework.