When some of a bank's expected demand for liquidity are stored in its assets,while other unexpected cash needs are met from near-term borrowings,the approach to liquidity management is known as:
A)liability management.
B)asset conversion.
C)borrowed liquidity management.
D)balanced liquidity management.
E)None of the options is correct

Question

Quizplus · Accepted Answer

The approach described in the question, where some of the expected demand for liquidity is stored in assets and unexpected cash needs are met from near-term borrowings, is known as balanced liquidity management. This approach seeks to balance the costs and benefits of holding liquid assets versus borrowing to meet unexpected needs, in order to maintain an appropriate level of liquidity while minimizing costs. Liability management and asset conversion refer to different approaches to managing the composition of a bank's balance sheet, while borrowed liquidity management is not a commonly used term in the field of finance.

When Some of a Bank's Expected Demand for Liquidity Are