Bank Analysis School

Internal Use Only

What is Liquidity? Ability to meet cash needs (expected and unexpected) at a reasonable cost

What is an example of a bank’s cash need?

Assessing a bank’s liquidity position starts with understanding their balance sheet

Internal Use Only

Inflows (Sources)

New deposits or borrowings Payments/Maturities of Loans or Securities Sale of Liquid Assets

Desired Level

Desired Level

Deposit Runoff Paying off borrowings Asset Growth (loans, investments)

Outflows (Uses)