Liquidity stress: protect the minimum buffer
A fictional bank wants to understand whether its liquidity resources cover a short-term outflow shock. Prepare a ratio calculation and size the remediation required under a case-specific management target.
Illustrative Finance Circle treasury case. All bank balances, targets and stress assumptions below are fictional, not RBC disclosures.
Independent Finance Circle learning material. The source organisation does not sponsor, author or endorse this exercise.
Clarify. Structure. Calculate. Defend.
Take 2 minutes to clarify the decision and definitions, 3 minutes to structure the analysis, then work the exhibits. Finish with a concise recommendation and answer a follow-up. The time is a suggested practice format, not an employer requirement.
Clarify before solving
What are the data basis and reporting boundary?
Illustrative Finance Circle treasury case. All bank balances, targets and stress assumptions below are fictional, not RBC disclosures.
Which assumptions can I use without requesting more data?
CAD millions. Eligible inflows are capped at 75% of gross outflows; the supplied inflows remain below that cap. LCR = HQLA / net stressed cash outflows. Use the supplied haircuts-adjusted HQLA.
What decision am I expected to support?
Action A adds 50 HQLA without changing net outflows. Action B reduces gross outflows by 30 without changing HQLA or inflows. Calculate each resulting LCR and B’s remaining HQLA need for the 120% target.
Build your structure
- Eligible HQLA, inflow cap and net outflows
- Short-term LCR versus stable funding
- Stress shortfall and target funding need
- Funding-action feasibility, cost and timing
Use the branches that matter to this decision. A memorised framework is less useful than explaining why each analysis could change your recommendation.
Everything you need to work the case.
Assumptions & boundaries
- CAD millions. Eligible inflows are capped at 75% of gross outflows; the supplied inflows remain below that cap.
- LCR = HQLA / net stressed cash outflows. Use the supplied haircuts-adjusted HQLA.
- The 120% management target is invented for this exercise, not a statement of RBC policy or a universal regulatory requirement.
- NSFR = available stable funding / required stable funding. This simplified ratio exercise is not a full regulatory calculation.
Base and stress inputs
| Metric | Base | Stress |
|---|---|---|
| HQLA | 130 | 130 |
| Gross 30-day outflows | 150 | 180 |
| Eligible 30-day inflows | 40 | 30 |
| Available stable funding | 210 | 210 |
| Required stable funding | 200 | 200 |
Choose the responsibility. Solve the decision.
Each level uses the exhibits above and asks a different question. Your entries stay in this open page only; copy your work before leaving.
Calculate the base metrics.
Calculate base net outflows, LCR and NSFR.
Can a high NSFR compensate mechanically for a low LCR?
Numerical checks compare your arithmetic with the case model. Written recommendations are self-practice and are not automatically graded.
03 · Reveal worked solution & decision guide
Expected numerical answers
- Net outflows
- 110 CAD million
- Base LCR
- 118.1818 %
- NSFR
- 105 %
Work through the calculation
- Net outflows = 150 − 40 = 110; the inflow cap is 112.5, so the full 40 is eligible.
- LCR = 130 / 110 × 100 = 118.18%. NSFR = 210 / 200 × 100 = 105%.
A strong concise response
My calculation shows that net outflows is 110 CAD million; base lcr is 118.1818 %; nsfr is 105 %. LCR and NSFR cover different liquidity horizons. Neither is equivalent to the cash account balance.
Answer the interviewer follow-up
Can a high NSFR compensate mechanically for a low LCR?
No. They measure different constraints. Report each metric against its applicable requirements rather than offsetting one percentage against the other.
Assessment rubric · 20 points
For self-review or mentor discussion. This rubric is not an automated written-answer grade or an employer scoring system.
Correctly derives all 3 numerical results for this level, keeps signs and units consistent, and explains the method.
Explains the objective: Calculate the base metrics. States the supplied scope, timing and metric definitions before calculating.
LCR and NSFR cover different liquidity horizons. Neither is equivalent to the cash account balance. Addresses the interviewer follow-up without contradicting the facts.
Leads with a clear conclusion, distinguishes facts from assumptions, and identifies the next evidence needed. Does not claim the source company asked or endorsed this question.
Use full precision until the final rounding. Alternative written recommendations may be reasonable if they respect the facts and explain assumptions. This is Finance Circle’s guide, not an official source-company answer.
Source & attribution
The references below identify the public reporting, hiring guidance, research or mock-interview material used for context. Finance Circle wrote the exercise and its answers. Illustrative figures are explicitly identified; they are not company results or findings.
Public context; Finance Circle’s scenario inputs are illustrative.
Source reviewed 30 October 2026. No external page is needed to answer this exercise. Company names and logos identify sources only. All trademarks belong to their respective owners.