Answer:
The correct answer is D)
Risk due to a sudden surge in liability withdrawals.
Step-by-step explanation:
In banking terms, this simply refers to the inability of the bank to meet with its financial responsibilities in the near term.
When a bank has excess capital tied down in the form of loans which have been collateralised, the physical assets upon the default of the loans become assets to the bank. Its liabilities to the depositors which are still in existence have to be met. If at any point in time the bank is unable to meet its liability to depositors and is also unable to quickly convert the assets, then it is said to be exposed to the risk of liquidity.
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