The risk that a bank cannot meet payment obligations in a timely and cost-effective manner is known as:
A) credit risk.
B) capital risk.
C) market risk.
D) operating risk.
E) liquidity risk.

Question

Quizplus · Accepted Answer

Liquidity risk refers to the risk that a bank cannot meet its payment obligations in a timely and cost-effective manner, due to a shortage of funds or inability to convert assets into cash quickly enough. This can lead to a loss of confidence in the bank and have serious consequences for its financial stability.

The Risk That a Bank Cannot Meet Payment Obligations in a Timely