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Explanation:
Contingent liquidity arrangements are credit lines or liquidity facilities established with commercial banks and central banks to ensure that the FMU has access to funds in case of unexpected liquidity shortfalls during the intraday settlement process. These arrangements are an essential part of risk management for FMUs to maintain smooth settlement operations.
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Q.5426 Which of the following tools used by Financial Market Utilities (FMUs) to manage intraday settlement involves maintaining backup credit lines from commercial banks and central banks for liquidity?
A
Contingent liquidity.
B
Net debit cap.
C
Settlement windows.
D
Collateral.