In banking, liquidity is the ability to meet obligations when they come due without incurring unacceptable losses. Managing liquidity is a daily process requiring bankers to monitor and project cash flows to ensure adequate liquidity is maintained. Maintaining a balance between short-term assets and short-term liabilities is critical. The investment portfolio represents a smaller portion of assets, and serves as the primary source of liquidity. A lack of liquidity can be remedied by raising deposit rates and effectively marketing deposit products. However, an important measure of a bank’s value and success is the cost of liquidity. Lower costs generate stronger […]