Exam 11: Liquidity and Reserves Management: Strategies and Policies

One of the ratios used in the liquidity indicator approach to managing a financial institution's liquidity needs is ___________.This ratio is cash and deposits due from depository institutions divided by total assets,where a greater ratio indicates a stronger liquidity position.

The ____________ is where a money position manager can cover a large reserve deficit quickly.It is usually one of the cheapest places to borrow but is also frequently volatile.

Some central banks around the world impose reserve requirements on bank loans.

A bank maintains an average clearing balance of $1,000,000 with the Federal Reserve.The Federal funds rate is currently 4.5 percent.What amount of credit will the bank earn over the reserve maintenance period that can be used to offset any fees charged by the Federal Reserve?

A manager that looks at loans and deposits increases and decreases among other things to measure the bank's liquidity position is using:

A bank or financial service institution can generally meet reserve requirements using all of the following except:

_________________________ are the assets a bank must,by law,hold behind its deposits.In the U.S. ,only vault cash and deposits held with the Federal Reserves can be used to meet these requirements.

If a bank in the United States runs a legal reserve deficit of more than 2 percent of its required daily average legal reserve position,it will be assessed an interest penalty equal to the Federal Reserve's discount rate plus 5 percent.

Many financial service institutions estimate their liquidity needs based upon experience and industry averages.This approach to managing liquidity is called the ____________ approach.

Most liquidity problems in banking arise from inside a bank,not from its customers.

Financial institutions face significant liquidity problems because of:

In the week about to begin,a bank expects $30 million in incoming deposits,$20 million in deposit withdrawals,$15 million in revenues from the sale of nondeposit services,$25 million in customer loan repayments,$5 million in sale of bank assets,$45 million in money market borrowings,$60 million in acceptable loan requests,$10 million in repayments of bank borrowings,$5 million in cash outflows to cover other operating expenses,and $10 million in dividend payments to its stockholders.The bank's net liquidity position for the week is expected to be:

_________________________ is the availability of cash in the amount needed at a reasonable cost.

A bank currently holds $105 million in transaction deposits subject to legal reserves but has managed to enter into sweep account arrangements affecting $55 million of these accounts.Given that the bank must hold 3 percent legal reserves up to $47.8 million of transaction deposits and 10 percent legal reserves on any amount above that,how much has this bank reduced its total legal reserves as a result of these sweep arrangements?

When a bank's sources of liquidity exceed it uses of liquidity,the bank will have a:

The liquidity problem for banks is made easier because most of their liabilities are not subject to immediate repayment.

A bank following a(n)_________________________ liquidity management strategy must take care that assets with the least profit potential are sold first.

The Sasser State Bank has just sold $25 million in Treasury Bills.Which type of factor affecting legal reserves is this for the bank?

The Fed funds rate usually hovers around the Fed's:

When a financial institution sells assets to manage liquidity,it faces ________________________.It loses future earnings on those assets,incurs transaction costs on those sales,and the assets most easily sold often have the lowest return.