Illiquidity is a problem to an FI because while FI:
A)liabilities tend to be highly illiquid, its assets usually are not
B)assets tend to be highly liquid, its liabilities usually are not
C)liabilities tend to be highly liquid, its assets usually are not
D)None of the listed options are correct.

Question

Quizplus · Accepted Answer

FI liabilities tend to be highly liquid because they often involve deposits from customers that can be withdrawn at any time. However, many of their assets, such as loans and investments, may be less liquid and take time to convert to cash. This mismatch can lead to problems if a large number of customers withdraw their deposits at once, leaving the FI without sufficient funds to meet its obligations.

Illiquidity Is a Problem to an FI Because While FI