In managing its liabilities to deal with liquidity problems, banks trade off

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When managing their liabilities to address liquidity problems, banks have to balance the need to meet deposit outflows with their desire to generate operating income. This trade-off involves managing their assets and liabilities (including loans, securities, deposits, and borrowings) to ensure they have sufficient cash and other liquid assets available to meet withdrawals while also maintaining their profitability. Factors such as interest rates and credit risks can affect this balance, but the key trade-off is between liquidity and profitability. The other options (A, B, and D) are not directly related to managing liquidity problems in banks.

In Managing Its Liabilities to Deal with Liquidity Problems, Banks