Exam 11: Liquidity and Reserves Management: Strategies and Policies

In the _____________ approach to managing liquidity,deposits and other sources of funds are divided into categories and,then liquidity managers must set aside liquid funds according to some desired operating rule.

Which of the following is a guideline for liquidity managers of banks?

If a bank receives more checks deposited to the accounts it holds than checks drawn against its deposit accounts,the bank's legal reserves will tend to increase.

Volume of legal reserves held at the Federal Reserve by depository institutions has declined sharply in recent years.

A financial institution has estimated that its growth rate in deposits over the last ten years has averaged 6 percent per year.This is the _________________________ of estimating future deposits.

The risk that liquid funds will not be available in the volume needed by a bank is often called:

A bank's money position manager is responsible for ensuring that the bank maintains an adequate level of legal reserves.

A bank maintains an average clearing balance of $5,000,000 with the Federal Reserve.The Federal funds rate is currently 6.5 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?

The ________________ approach to managing liquidity starts with two simple facts,liquidity rises as deposits increase and loans decrease,and liquidity falls when deposits fall and loans increase.

A _________________________ is the difference between an institution's sources and uses of funds.

A financial institution has estimated that over the last ten years the deposit withdrawals during Christmas time is about 25% higher than during any other time of the year.This is the _________________________ of estimating future deposits.

All central banks impose reserve requirements on the banks they regulate.

Recent research on money position management suggests that the reserve deficits of smaller depository institutions normally occur:

Not all _____________ banks around the world have reserve requirements.

The Burr Bank has just calculated the ratio of its U.S.Government Securities to Total Assets.Which liquidity indicator is this?

A bank currently has $150 million in "hot money" deposits against which it wants to hold an 80 percent reserve and $90 million in vulnerable deposits against which it wants to hold a 30 percent reserve.It also has $45 million in stable deposits against which it wants to hold a 5 percent reserve.Legal reserves for the bank are 5 percent of all deposits.What is the bank's liability liquidity reserve?

One principle of sound bank liquidity management is to be sure to first sell those assets which have least profit potential.

"Core deposits","hot money",and "vulnerable money" are categories of funds under which of the following methods of estimating a bank's liquidity needs?

The oldest approach to meeting liquidity needs,which relies on the sale of liquid assets to meet liquidity demands is called ________________________.