3 Questions
What is the purpose of liquidity management?
Ensuring timely access to cash whenever needed
What does liquidity management refer to?
Meeting short-term cash requirements without substantial losses
What causes deposit outflows in liquidity management?
Withdrawal of funds by depositors
Study Notes
Liquidity Management
- Refers to the process of managing a bank's liquidity to ensure its ability to meet its short-term obligations and maintain financial stability
- Involves forecasting and managing cash inflows and outflows to maintain an adequate liquidity buffer
Deposit Outflows
- Occur when depositors withdraw their funds from the bank, reducing the bank's liquidity
- Can be caused by factors such as:
- Loss of depositor confidence
- Higher interest rates offered by competitors
- Economic downturns
- Regulatory changes
- Bank-specific issues (e.g. management problems, asset quality concerns)
Test your knowledge of liquidity management with this quiz. Explore the strategies and techniques used by organizations to meet short-term cash requirements and ensure timely access to liquid funds. Learn about deposit outflows and how organizations mitigate the risk of losses when depositors withdraw funds.
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