Using stored liquidity to offset a deposit drain will reduce the size of the bank,but using purchased liquidity to offset the drain will not.

Question

Quizplus · Accepted Answer

Using stored liquidity means using the bank's own cash reserves to offset the deposit drain, which will reduce the bank's size. On the other hand, purchasing liquidity from external sources (such as other banks or the central bank) will not directly affect the size of the bank.

Using Stored Liquidity to Offset a Deposit Drain Will Reduce