Banks can increase their liquidity position by restructuring their asset portfolio to contain less ____ and more ____.

Question

Quizplus · Accepted Answer

Banks can increase their liquidity position by reducing loans in their asset portfolio and increasing their holdings of more liquid and easily marketable Treasury bills. This will enable banks to have sufficient cash and cash equivalents to meet sudden cash demands from their customers or to cover unexpected losses. Restructuring their asset portfolio is one of the ways banks can manage their liquidity risk.

Banks Can Increase Their Liquidity Position by Restructuring Their Asset