Which type of financial intermediary is more highly exposed to liquidity risk?

Question

Quizplus · Accepted Answer

Depository institutions such as banks and credit unions are more highly exposed to liquidity risk because they rely heavily on short-term deposits to fund their long-term loans and investments. If there is a sudden increase in deposit withdrawals, they may not have enough cash on hand to meet the demand which can lead to liquidity problems. While other financial intermediaries such as property-casualty insurance companies, life insurance companies, and mutual funds may also face liquidity risk, it is typically less severe compared to depository institutions.

Which Type of Financial Intermediary Is More Highly Exposed to Liquidity