Module: | Run-off Rates & Cash Outflows/Inflows
Q9: Regarding "Cash Inflows" and "Reverse Repos," which of the following scenarios is correct?
1. Reverse Repo (Level 1 Asset): Assumed to be rolled over (0% Inflow).
2. Reverse Repo (Non-HQLA): Assumed NOT to be rolled over (100% Inflow).
3. Total Inflow Cap: Inflows are capped at 75% of Total Outflows.
4. Open Maturity Loans: Included as inflow even if no payment is due.
2. Reverse Repo (Non-HQLA): Assumed NOT to be rolled over (100% Inflow).
3. Total Inflow Cap: Inflows are capped at 75% of Total Outflows.
4. Open Maturity Loans: Included as inflow even if no payment is due.
✅ Correct Answer: A
This concept within Liquidity Coverage Ratio (LCR) is important because it prevents banks from over-relying on inflows.
Reverse repos backed by Level 1 assets are assumed to roll over (0 percent inflow), while those with non-HQLA provide 100 percent inflow.
The 75 percent cap on total inflows ensures banks hold a minimum stock of High Quality Liquid Assets.
Reverse repos backed by Level 1 assets are assumed to roll over (0 percent inflow), while those with non-HQLA provide 100 percent inflow.
The 75 percent cap on total inflows ensures banks hold a minimum stock of High Quality Liquid Assets.