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Which risk is directly related to a bank’s ability to convert assets into cash quickly?

medium Q8 of 15
Banking Awareness - Basics Of Banking & Banking Terminology
Which risk is directly related to a bank’s ability to convert assets into cash quickly?
ALiquidity risk
BCredit risk
CMarket risk
DOperational risk
Step-by-Step Solution

  1. Step 1: Focus on cash conversion

    The issue is speed of converting assets to cash.

  2. Step 2: Match with risk type

    Liquidity risk concerns availability of liquid funds.

  3. Final Answer:

    Liquidity risk → Option A

  4. Quick Check:

    Cash availability problem = Liquidity risk ✅
Quick Trick: Asset-to-cash problem = Liquidity risk.
Common Mistakes:
  • Confusing liquidity with creditworthiness.
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