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Liquidity management
What is liquidity management in the context of banking?
Liquidity management refers to a bank's ability to meet its financial obligations as they fall due without incurring unacceptable losses. It involves maintaining adequate liquid assets and managing cash flows to ensure operational continuity.
What is the difference between asset liquidity and funding liquidity?
Asset liquidity is ease of selling assets; funding liquidity is ease of borrowing.
What is the primary objective of liquidity management for banks?
The primary objective is to ensure that the bank can meet all its payment obligations on time, both expected and unexpected, while minimising the cost of holding liquid assets.
What is meant by 'liquidity hoarding' by banks during financial stress?
Banks accumulate excess liquid assets instead of lending to others.
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