A ________________ risk can occur when a bank cannot fund demand for withdrawals.
A) savings.
B) liquidity.
C) depositor.
D) systemic.

Question

Quizplus · Accepted Answer

Liquidity risk refers to the risk that a financial institution cannot fund demand for withdrawals from its depositors or counterparties. This can occur when a bank's assets cannot be sold or converted into cash fast enough to meet the demand for withdrawals. It is important for banks to manage liquidity risk by ensuring they have sufficient cash reserves and access to funding sources, such as lines of credit or interbank lending markets. Savings, depositor, and systemic risks are all different types of risks that banks face but do not refer specifically to the risk of not being able to fund withdrawals in a timely manner.

A ________________ Risk Can Occur When a Bank Cannot Fund