The risk that banks will not be prepared to meet unexpected withdrawals by depositors or to accommodate unexpected loan demand by valued customers is which of the following?
A)default risk
B)insolvency risk
C)liquidity risk
D)exchange rate risk

Question

Quizplus · Accepted Answer

Liquidity risk refers to the possibility that a bank may not have enough funding to meet unexpected withdrawals from depositors or satisfy demand for loans from customers. This can lead to a cash shortfall and potential financial distress for the bank. Default risk refers to the likelihood that a borrower will default on their debt obligations, insolvency risk refers to the risk of a bank becoming insolvent and unable to meet its obligations, and exchange rate risk refers to the risk arising from fluctuations in exchange rates that can impact a bank's assets and liabilities denominated in different currencies.

The Risk That Banks Will Not Be Prepared to Meet