FINSIA Professional Banking Fundamentals Practice Questions - FINSIA Professional Banking Fundamentals (Career Qualified In Banking) Exam

Why is liquidity transformation a fundamental banking function?

It allows banks to lend a portion of deposits while keeping enough liquid assets to meet expected withdrawals It removes the need for APRA supervision of ADIs It means banks hold 100% of deposits as physical cash at all times It guarantees every depositor can never withdraw funds

Correct Answer:

It allows banks to lend a portion of deposits while keeping enough liquid assets to meet expected withdrawals

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