Managing Non-Deposit Liabilities in Financial Institutions
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Questions and Answers

Which of the following is a key question and main goal in managing non-deposit liabilities in financial institutions?

  • What can banks do when deposit volume is inadequate to support their desired loans and investments? (correct)
  • How can banks reduce their loan volume?
  • How can banks increase their deposit volume?
  • How can banks minimize their non-deposit liabilities?

    • What is the relationship between loans and deposits in the context of liability management?

  • Deposits are used to make loans. (correct)
  • Loans and deposits have no relationship in liability management.
  • Loans are made after deposits are received.
  • Deposits are made after loans are approved.

    • What does bank management do when deposit volume is inadequate to support all loans and investments?

  • Seek out the lowest-cost source of borrowed funds. (correct)
  • Reduce the loan volume.
  • Minimize non-deposit liabilities.
  • Increase the deposit volume.

    • What is the priority for a lender in the context of liability management?

    <p>To make loans to customers with positive net earnings.</p> Signup and view all the answers

    What is the term used to describe alternative non-deposit sources of funding mentioned in the text?

    <p>Shadow banks</p> Signup and view all the answers

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