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Estimate the liquidity requirement for Prudent Commercial Bank in March? Prudent commercial bank is trying to estimate the liquidity requirements today (last day of February)
Estimate the liquidity requirement for Prudent Commercial Bank in March?
Prudent commercial bank is trying to estimate the liquidity requirements today (last day of February) for the month of March. Assume legal reserve requirements are 5%. Currently the bank's total deposits are 5000 million and are expected to grow by 8 percent during the month of March. The bank has estimated that 20% of the total deposits are hot money deposits, 30% are vulnerable deposits and the rest are stable (core) deposits. The liquidity manager would like to keep a liquidity reserve of 80% for hot money, 35% liquidity reserve for vulnerable deposits and 10% liquidity reserve for core deposits. Currently the bank's total loans are at 4000 million. The bank expects a 400 million reduction in the level of loans during MarchStep by Step Solution
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