The major strength of the structure-of-deposits method is:
A) it centers management attention on one of the most likely causes of liquidity pressures
B) it ignores other liquidity demands
C) it categorizes loan demands according to stability
D) it assigns a probability of withdrawal to each nondeposit source of funds

Question

Quizplus · Accepted Answer

The structure-of-deposits method focuses on analyzing the composition of a bank's deposits to assess liquidity risk, emphasizing the importance of understanding deposit stability as a key factor in managing liquidity pressures. This method helps management concentrate on how different types of deposits may react under various conditions, which is crucial for liquidity planning.

The Major Strength of the Structure-Of-Deposits Method Is