General Studies · Financial Risk Management
Systemic risk within a financial institution often escalates into a liquidity crisis only after external shocks occur. A primary internal indicator of increasing systemic risk due to 'aggressive growth' strategies is:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Regular stress-testing of the balance sheet under various hypothetical economic scenarios.
- 2Increasing reliance on volatile short-term wholesale funding to finance long-term illiquid assets.✓
- 3Gradual diversification of the loan portfolio across multiple non-correlated sectors.
- 4Maintaining a high Liquidity Coverage Ratio (LCR) well above regulatory requirements.
Correct answer
Increasing reliance on volatile short-term wholesale funding to finance long-term illiquid assets.
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