A U.S. company has a secured committed line of credit of $5.5 million and has an available balance of $4 million. The company successfully transmitted a $5.5 million wire transfer instruction out to the bank via SWIFT. The bank contacted the company and informed it that the wire transfer would not be processed. What is the MOST LIKELY reason the bank gave the company?

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Question restated: A U.S. company has a secured committed line of credit of $5.5 million and an available balance of $4 million. The company sent a $5.5 million wire transfer instruction via SWIFT, but the bank notified that the wire would not be processed. Most likely bank rationale: Option B states that 'The bank imposed a guidance line of credit on the account.' This is the most plausible explanation. To understand why, consider a guidance line of credit as a discretionary risk-management control the bank can apply to a customer’s account. Even though the formal credit line totals $5.5 million, the available balance is only $4 million, and a guidance line can be used to cap or temporarily restrict large outgoing payments to prevent overextension, ensure liquidity protection, or manage concentration risk. In this scenario, the bank might have determined that processing a $5.5 million wire would exceed the customer’s current risk limits or violate internal policy, despite the nominal line size, and thus blocked the transfer as a precaution. The bank’s action aligns with prudent credit and liquidity risk management, rather than a simple arithmetic shortfall.

33:390:430:90 TREASURY MANAGEMENT Quiz - Chapter 4 - Payment Systems

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