Explanation

An increasing hot money ratio would create concern for a liquidity manager because:

• Hot money refers to volatile, short-term deposits that can be withdrawn quickly
• Hot money ratio = Volatile liabilities / Total liabilities
• When this ratio increases, it means the bank is relying more on unstable funding sources that can be withdrawn rapidly during stress periods
• This creates liquidity risk and undermines confidence in the bank's stability

Analysis of other options:

• B. Increasing deposit composition ratio: This typically refers to the proportion of stable core deposits, which is generally positive for liquidity
• C. Increases in reverse repurchase agreements: These are short-term secured funding sources that can provide liquidity, not necessarily concerning
• D. Excess of federal funds sold over purchased: This indicates the bank is lending more than borrowing in the interbank market, which can be a sign of excess liquidity

Therefore, only option A represents a concerning indicator for liquidity stability.