Question

Financial maths-- multiple choice!!!

What is the risk associated with electronic money management that can arise from a bank not having enough cash on hand?

solvency
liquidity
credit risk
operational risk

Answer 1

liquidity

Explanation:

when the bank gets only electronic money transfers, they don't get actual money. so, they can use that only for other electronic transfers, but if there is the need for actual money (e.g. a lot of people need a cash payout), the bank is then not able to do that. they don't have enough cash = they are not liquid.

which can actually lead to insolvency.