Generally speaking the maturity mismatch of banks is due to
A) having short term liabilities and long term assets
B) having long term liabilities and short term assets
C) liabilities that pay a fixed rate of interest and assets that pay a variable rate
D) depositors that are willing to keep their money in the bank for many years whilst loans are often short term
E) all of the above

Question

Quizplus · Accepted Answer

Maturity mismatch in banks occurs when they have long term liabilities, such as fixed deposits, and short term assets, such as loans and advances. This creates a liquidity risk for the bank, as they may not be able to meet the short term obligations if there is a sudden outflow of funds. Therefore, banks try to maintain a balance between their short and long term assets and liabilities to manage this risk. The other options are not necessarily related to maturity mismatch.

Generally Speaking the Maturity Mismatch of Banks Is Due to