Decreasing the amount of liquid assets held for the purpose of meeting loan demands and deposit withdrawals and increasing the usage of deposit and nondeposit sources of funds paying market rates of interest is known as:
A) liquidity management
B) leverage adjustment
C) liability management
D) liquidity adjustment

Question

Quizplus · Accepted Answer

This strategy is known as liability management. It involves managing the liabilities side of a bank's balance sheet (i.e., its sources of funding) by increasing the use of deposits and other borrowings that pay market rates of interest, rather than relying solely on traditional liquid assets to meet loan demands and withdrawal requests.

Decreasing the Amount of Liquid Assets Held for the Purpose