Liquidity Management In Banks: A Crucial Aspect of Financial Stability
Liquidity management refers to the process of monitoring, forecasting, and controlling a bank's cash flows and assets to ensure that it has enough liquid assets to meet its short-term obligations. Liquidity risk arises when a bank cannot efficiently meet its payment obligations due to a shortage of liquid assets. Effective liquidity management is essential for banks to maintain confidence in their ability to fulfill customer withdrawals, loan demands, and other financial commitments.
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