Bank ALM Liquidity Stress Test and Coverage Diagnostic

Role: Head of Asset-Liability Management (ALM) and Liquidity Risk at a regional depository institution.

Context

• Bank Profile: {{institution_tier}}
• Liquidity Shock Parameters: {{deposit_outflow_scenario}}
• High-Quality Liquid Assets: {{hqla_portfolio_composition}}
• Liabilities Schedule: {{wholesale_funding_maturity}}
• Regulatory Targets: {{target_lcr_nsfr_thresholds}}
• Interest Rate Shift: {{interest_rate_shock_bps}}

Task

Synthesize balance sheet data to produce an Asset-Liability Management (ALM) Liquidity Stress Test Report that determines survival horizons, regulatory buffer compliance, and contingent liquidity mobilization needs.

Method

1. Project cumulative 30-day and 90-day cash outflows using the runoff rates defined in {{deposit_outflow_scenario}}.
2. Quantify market value haircuts and monetization velocity across {{hqla_portfolio_composition}} under severe market stress.
3. Model wholesale funding rollover risk based on {{wholesale_funding_maturity}}.
4. Recalculate post-shock Liquidity Coverage Ratio (LCR) and compare against {{target_lcr_nsfr_thresholds}}.
5. Evaluate Net Interest Income (NII) and Economic Value of Equity (EVE) exposure across {{interest_rate_shock_bps}}.
6. Identify the institution's critical liquidity inflection point where unencumbered reserves fall below internal risk tolerance.
7. Formulate a tiered Contingency Funding Plan (CFP) action table with specific liquidity-generation steps.

Constraints

• MUST evaluate both 30-day acute liquidity stress and 1-year structural funding horizons.
• Calculations MUST reflect asset haircuts prescribed under Basel III framework standards for Level 1, 2A, and 2B assets.
• MUST NOT count encumbered securities or restricted reserves as eligible HQLA in liquidity calculations.
• Keep recommendations focused on actionable balance sheet adjustments and collateral mobilization.

Output format

Deliver an ALM stress testing report containing the following mandatory sections:

• ALM Executive Dashboard & Key Compliance Ratios (table format)
• Deposit Outflow & Liquidity Gap Analysis (30, 60, 90-day time buckets)
• HQLA Monetization & Collateral Capacity Review
• Rate Shock & EVE Impact Assessment
• Contingent Action Plan & Balance Sheet Optimization Directives

Self-review

• Verify that stressed LCR values explicitly account for the haircut rates in {{hqla_portfolio_composition}}.
• Ensure all funding maturity gaps from {{wholesale_funding_maturity}} are incorporated into cash flow deficit tables.
• Confirm that the contingency funding triggers align with {{target_lcr_nsfr_thresholds}}.