Explanation:
Limit structures and escalation levels serve as an explicit link between a bank's contingency funding plan (CFP) and its liquidity stress testing framework. Stress testing helps calibrate liquidity limits and early warning indicators (EWIs). When these limits are breached, it triggers escalation levels that invoke specific actions detailed in the CFP.
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20.12.1. Which of the following provides the BEST explicit link(s) between a bank's contingency funding plan (CFP) and its liquidity stress testing framework?
A
Communication plan
B
Limit structure and escalation levels
C
Funding sources concentration and non-core funding
D
Industry factors such as profitability trends in the financial sector
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