The Frost Bank has lost a large percentage of its retail (core) insured deposits and has had to rely more on uninsured certificates of deposits and other short-term borrowings. Which of the following statements is false?

Question

Quizplus · Accepted Answer

Losing retail insured deposits and relying on uninsured certificates of deposits and short-term borrowings increases the liquidity risk on the liability side. Therefore, option B is false. Option A is correct because uninsured certificates of deposits and short-term borrowings are more liquid than retail insured deposits. Option C is also correct because the bank will likely have to pay a higher interest rate on uninsured certificates of deposits and short-term borrowings to attract depositors.

The Frost Bank Has Lost a Large Percentage of Its