What two factors are considered in managing liquidity?

Accounting Dec 18, 2020

Expert Solution

Assets and liabilities are the two important factors considered while managing liquidity. For banks, it has been observed that asset-based liquidity is more significant than liability-based liquidity. A cushion of encumbered high-quality liquid assets should be maintained by the bank. There is a need to manage collateral positions, intra-day liquidity positions, and risks.

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