Financial Risk Manager Part 2
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The CFO of a bank has asked for a review of the bank's contingency funding plan (CFP) and would like to ensure that key components are incorporated in alignment with best practices. Which of the following is a correct statement regarding the key components to be found in an effective CFP?
A
Liquidity stress testing scenarios are designed to focus solely on institution-specific risks and address both market (asset) liquidity and funding liquidity over short-term and prolonged stress periods.
B
Institutions should align their CFP stress scenarios to those in their liquidity stress testing framework, as well as to other frameworks such as recovery and resolution plans.
C
Contingent actions, such as maintaining investment strategies to reinvest maturing securities, should be identified in order to maximize and maintain bank profitability during stressed periods.
D
The liquidity crisis team may invoke the CFP based on a review of the markets, industry, bank-specific conditions, and liquidity stress testing results.