Exam 11: Liquidity and Reserves Management: Strategies and Policies

Core deposit ratio is used as one of the liquidity indicators for depository institutions and is defined as ratio of the core deposits to total assets.

The sources and uses of funds method of estimating a bank's liquidity requirements divides the bank's liabilities into three categories-hot money,vulnerable funds,and stable funds-and estimates the probability of each being withdrawn from the bank.

Asset conversion is considered to be a costless approach to liquidity management.

All central banks around the world have some specified reserve requirement.

A(n)_________________________ is an account many banks hold at the Federal Reserve to cover any checks drawn against the bank.

David Ashby has just paid off the balance on his home mortgage with First American Bank.What source of liquidity does this represent to the bank?

Many analysts believe there is only one ultimate sound method for assessing a financial institution's liquidity needs.This method centers on ___________.

Sources of liquidity for banks include:

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

A(n)_________________________ is the person in a bank,responsible for the bank's cash position and meeting legal reserve requirements.

Many depository institutions hold __________ balances (extra reserves)to help prevent overdraft penalties.

Which of the following is an example of a source of funds?

Liquid assets must have a reasonably stable price so that the market is deep enough to absorb the sale without a significant loss of value.

The most important source of liquidity for a depository institution is:

Factors that influence a bank's choice among the various sources of reserves include which of the following?

The Simpson State Bank of Stillwater has just sold Federal funds to another bank in its Federal Reserve district.Which type of factor affecting legal reserves is this for the bank?

Discount window loans jumped dramatically the day following 9/11.

In the week to come,a bank expects $55 million in incoming deposits,$75 million in acceptable loan requests,$35 million in money market borrowings,$10 million in deposit withdrawals,and $30 million in loan repayments.The bank is expecting a:

The Taylor Treadwell Bank has just calculated the ratio of its net loans and leases to total assets.Which liquidity indicator is this?

While the largest U.S.depositories are required to settle their legal reserve requirements with the Federal Reserve over successive bi-weekly periods,the more numerous but smaller banks are required to do so: