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Question 5. [25 points) a) What are the largest type of asset and the most important source of funding for commercial banks in the UK?

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Question 5. [25 points) a) What are the largest type of asset and the most important source of funding for commercial banks in the UK? (5 points] b) Provide an explanation of why liquidity management is especially im- portant for commercial banks relative to other businesses. [10 points] c) When managing credit risk, banks can make use of several mechanisms to minimise its effect on profitability. Give an example of two of these and explain how they can help bank managers achieve their objective of maximising returns while minimising risk. (10 points)

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