What is bank liquidity risk?
Bank liquidity risk is the possibility that a bank cannot obtain cash to meet payments when due.
Definition, calculation and mechanism
Deposits can be withdrawn sooner than many loans mature. Banks hold liquid assets and model potential outflows. A carrying value does not guarantee immediate sale at that price under stress.
Interpretation, examples and limits
Liquidity shortage and insolvency differ, though sustained cash stress can create losses. Supervision, deposit insurance and central-bank facilities differ by jurisdiction.
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