Banking · Liquidity Risk
Liquidity risk may threaten even otherwise solvent institutions if they are unable to meet obligations as they fall due without incurring unacceptable losses. Which of the following best explains liquidity risk?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The risk that demand for loans may decline during economic slowdown
- 2The risk that a borrower may default on interest payment after restructuring
- 3The risk that the institution's capital adequacy ratio may exceed regulatory requirements
- 4The risk that the institution may be unable to obtain cash or funding in time to meet payment obligations✓
Correct answer
The risk that the institution may be unable to obtain cash or funding in time to meet payment obligations
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