Explanation:
A deposit tracker report primarily focuses on the bank's deposit base and its relationship to loans. The Loan-to-Deposit (LTD) ratio is a crucial liquidity metric. A healthy liquidity position usually involves keeping the LTD ratio below a certain upper ceiling (e.g., 80%), meaning the bank is not over-extended and has sufficient deposits to fund its loans and cover potential withdrawals. Option A suggests a lower floor of 120%, which is incorrect as an LTD > 100% indicates the bank relies on wholesale funding and is less liquid, so a limit would be an upper ceiling, not a lower floor. Options C and D relate to equity valuation and interest rate risk (duration gap), respectively, not liquidity.
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20.11.1. The staff at Umbrella Street Bank, which is a commercial bank (it could also be a savings institution or credit union), produces several liquidity risk reports on a daily, weekly, monthly, and quarterly basis. Among these liquidity risk reports is a deposit tracker report. Among the following metrics, which is MOST LIKELY to appear in their deposit tracker report?
A
Loan-to-deposit (LTD) ratio (current and forecast) versus board-approved lower floor (limit) of 120.0%
B
Loan-to-deposit (LTD) ratio (current and forecast) versus board-approved upper ceiling (limit) of 80.0%
C
Market-to-book ratio of common equity (current and forecast) versus investor-communicated target of 1.30
D
The leverage-adjusted duration gap (current and forecast) versus board-approved upper ceiling of 3.5 years