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Inability of a bank to meet its short-term financial obligations is known as which risk?

easy Q3 of 15
Banking Awareness - Basics Of Banking & Banking Terminology
Inability of a bank to meet its short-term financial obligations is known as which risk?
ACredit risk
BOperational risk
CLiquidity risk
DMarket risk
Step-by-Step Solution

  1. Step 1: Focus on cash flow issue

    The problem is shortage of ready funds.

  2. Step 2: Match with risk type

    Liquidity risk arises from inability to meet short-term needs.

  3. Final Answer:

    Liquidity risk → Option C

  4. Quick Check:

    Cash crunch = Liquidity risk ✅
Quick Trick: No ready cash = Liquidity risk.
Common Mistakes:
  • Confusing liquidity risk with credit risk.
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