Financial Awareness - Risk, Stability & Emerging Finance
Which type of risk in banking is associated with sudden withdrawal of deposits by customers?
Which type of risk in banking is associated with sudden withdrawal of deposits by customers?
easy Q1 of 15
Step-by-Step Solution
Step 1: Understand liquidity risk
Liquidity risk arises when a bank is unable to meet its short-term financial obligations due to insufficient liquid assets.Step 2: Analyze the options
Sudden withdrawal of deposits reduces liquid funds, causing liquidity risk. Credit risk relates to borrower default, market risk to market fluctuations, and operational risk to internal failures.Final Answer:
Liquidity Risk → Option AQuick Check:
Liquidity risk = inability to meet short-term obligations ✅
Quick Trick: Liquidity risk often involves cash flow shortages.
Common Mistakes:
- Confusing liquidity risk with credit or market risk.
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