A disadvantage of using liability management to manage an FI's liquidity risk is:
A)the resulting shrinkage of the FI's balance sheet
B)the high cost of purchased liabilities
C)the accessibility of international money markets
D)loss of flexibility as a result of dependence upon purchased liabilities

Question

Quizplus · Accepted Answer

Liability management often involves acquiring funds through purchased liabilities, which can be more expensive than other sources of funding, thus increasing the cost of managing liquidity risk.

A Disadvantage of Using Liability Management to Manage an FI's