Explain the concept of ‘Liquidity’ in the banking sector. |.

Question
  • A. The total amount of money a bank has
  • B. The bank's ability to meet its short-term obligations
  • C. The value of a bank's investments
  • D. The number of customers a bank has
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correct Answer ( B )

In the banking sector, liquidity refers to a bank’s ability to meet its short-term obligations without incurring significant losses. It’s the ease with which a bank can convert its assets into cash. High liquidity indicates that a bank has sufficient readily available funds to meet its immediate needs, such as withdrawals from depositors, payments to creditors and other financial obligations . Maintaining adequate liquidity is crucial for a bank’s stability and solvency. Insolvency occurs when a bank cannot meet its short-term obligations

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2025-03-24T19:40:51+00:00 2 views