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The financing gap can be defined as average loans minus average deposits or, alternatively, as negative liquid assets plus borrowed funds. A negative financing gap
The financing gap can be defined as average loans minus average deposits or, alternatively, as negative liquid assets plus borrowed funds. A negative financing gap implies that the bank must borrow funds or rely on liquid assets to fund the bank. Thus, the financing requirement can be expressed as financing gap plus liquid assets. This relationship implies that some level of loans and core deposits as well as some amount of liquid assets determine the need for the bank to borrow or purchase funds. Is this statement True or False?
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