The two most pressing demands for liquidity from bank come from, first, customers withdrawing their deposits and, second, from:

• a. credit requests from customers the bank wishes to keep.

• b. checks being cashed at local stores and directly from the bank.

• c. demands for wired funds from correspondent banks.

• d. legal reserve requirements set by the Central Bank.

For a bank, there is always a trade-off problem between liquidity and:

• a. risk exposure

• b. revenue generation

• c. profitability

• d. efficiency

Financial institutions face significant liquidity problems because of:

• a. imbalances between the maturities of their assets and liabilities.

• b. their high proportion of liabilities subject to immediate withdrawal.

• c. the sensitivity of their business to changes in interest rates.

• d. imbalances between the maturities of their assets and liabilities and their high proportion of liabilities subject to immediate withdrawal

• e. all of the answer options are correct

Which of the following is not a source of liquidity for financial institutions?

• a. deposits

• b. money market borrowings

• c. sale of marketable securities

• d. dividend payments to stockholders.

Uses of liquidity for banks include:

• a. long term liabilities

• b. Issuance of debentures by banks

• c. sale of fixed assets

• d. repayments of loans disbursed.

• e. deposit withdrawals

When a bank’s sources of liquidity exceed its uses of liquidity, the bank will have a :

• a. positive liquidity gap

• b. negative liquidity gap

• c. cyclical liquidity gap

• d. seasonal liquidity gap

• e. none of the options is correct.

A adequately capitalized bank must have a ratio of tier 1 capital to risk-weighted assets of at least:

• a. 8 percent

• b. 6 percent

• c. 10 percent

• d. 4.5 percent

The RBB Bank wants to protect itself from credit risk by making large loans to corporate customers, by making residential mortgages to family, by making agricultural loans to farmers, by making small business loans to business. What defence against risk is this bank making?

• a. Quality management

• b. Portfolio diversification

• c. Geographic diversification

• d. Increasing owners’ capital

The NanYang Bank Berhad wants to protect itself from risk. It decides to make loans in other Southeast Asian Countries such as Laos, Myanmar, Indonesia, Cambodia, Vietnam and Thailand. What defence against risk is this bank making?

• a. Quality management

• b. Portfolio diversification

• c. Geographic diversification

• d. Increasing owners’ capital

___ represent(s) funds set aside for contingencies, such as legal action against the institution or a sinking fund to retire stock or debt in the future.

• a. undivided profits

• b. surplus

• c. common stock

• d. equity reserves