In terms of liquidity risk measurement, the financing requirement is defined as
A)total deposits minus core deposits.
B)financing gap plus liquid assets.
C)rate sensitive assets minus rate sensitive liabilities.
D)total assets minus total liabilities.
E)average loans minus average deposits.

Question

Quizplus · Accepted Answer

The financing requirement is the amount of funding needed to finance the bank's assets. It is calculated as the financing gap (the difference between rate sensitive assets and rate sensitive liabilities) plus the amount of liquid assets needed to meet potential liquidity demands. Therefore, choice B, which combines these two components, is the best option. The other choices do not accurately represent the financing requirement.

In Terms of Liquidity Risk Measurement, the Financing Requirement Is