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Director's Corner
San Francisco Region Director's College Computer- Based Training
Liquidity
Rating Liquidity
Answer:
Examiners rated the liquidity component a "2". The last exam rated liquidity a "2" as well. While the position has apparently deteriorated, the examiners concluded that the position remains satisfactory given $30 million in borrowing lines and $20 million in available-for-sale securities (a substantial amount of emergency liquidity for a $200 million bank). Additionally, the management team appeared to recognize that weaknesses were developing and agreed to limit growth going forward, thus limiting future strains on liquidity. Keep in mind, that a downgrade to a "3" is possible, if "funds management practices are in need of improvement".
Now let's move on to the sensitivty to market risk module.
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