Banks prefer to hold their liquid assets in the money market rather than in their exchange settlement accounts.

Question

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Banks prefer to hold their liquid assets in the money market rather than in their exchange settlement accounts because money market instruments typically offer a higher yield and easier access to funds. Exchange settlement accounts are primarily used for settling payment obligations with other banks and the central bank, and generally do not offer a significant return on balances held.

Banks Prefer to Hold Their Liquid Assets in the Money