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A risk consultant has been hired by a bank to review and evaluate the bank's current liquidity transfer pricing (LTP) policy and recommend changes to it. The consultant reviews the governance of the LTP process and prepares a report based on industry best practices. Which of the following would be a correct recommendation for the consultant to make?
A
The real costs of the bank's liquidity cushion are best reduced through long-term funding.
B
LTP of contingent bank obligations, such as collateral calls and committed lines of credit, can only be conducted after the first drawdown.
C
A pooled average cost of funds approach is the most accurate LTP formula.
D
A liquidity transfer price should reflect the costs, benefits, and risks of the bank as a whole.