Please explain why is the reason 1 correct. According to me reason 3 instead of 1 should be the correct answer
Share
Please briefly explain why you feel this question should be reported.
Please briefly explain why you feel this answer should be reported.
Please briefly explain why you feel this user should be reported.
Maturity mismatch is a problem when liabilities exceeds assets i.e., funding long term assets through short term liabilities which will cause a liquidity problem in short term if unable to rollover the short term liability.
There is no problem if assets exceeds liabilities as it will result in surplus liquidity.
What if the asset are funded with short term liability and asset are more than liability.. then there would be liquidity mismatch.. if liability (deposits) are in excess how come a bank faces liquidity mismatch
That’s my question
liabilities exceeding assets means at a particular maturity more liabilities are maturing than assets (liability creates cash outflow at maturity and assets cash inflow) therefore its a maturity mismatch and we will face liquidity problem.