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Bank A has a loans/deposits ratio of 10%. Bank B has a loans/deposits ratio of 90%. Which of the following statements are true? a. Bank
Bank A has a loans/deposits ratio of 10%. Bank B has a loans/deposits ratio of 90%. Which of the following statements are true?
a. Bank A is better because it has lower liquidity risk. b. Bank A is lending out a lot of its funding. c. If Bank A is near its borrowing limit, it could lead to future liquidity problems. d. A loans/deposits ratio shouldnt be too low because then the bank isnt making money, however a high ratio means there could be liquidity risk in the future. e. None of the above.
Please explain concept. thanks
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