Question

Even if a Bank has much more in assets than deposits it may have problems paying depositors if too many wish to withdraw at once because a large portion of its assets is ______.

Answer 1

Answer:

Invested in some way, not available as a liquid asset.

Explanation:

Banks do not keep all deposited money as liquid assets, such as cash in the house. Actually, they only keep a small amount enough to run the day to day transactions, such as withdrawals. The majority is invested in stocks or lent in some way to generate interest. Putting it simply, there simply is not enough money in them to pay all the deposits if all clients decided to withdraw all their deposited money at the same time.