The Liquidity Component of the CAMELS Rating Refers to

question 43

Multiple Choice

The liquidity component of the CAMELS rating refers to

• A)regulators' concern about how a bank's earnings would change if economic conditions change.
• B)how well the bank's management would detect its own financial problems.
• C)a bank's sensitivity to financial market conditions.
• D)monitoring the type of loans that are given, the bank's process for deciding whether to provide loans, and the credit rating of debt securities that it purchases.
• E)excessive borrowing by banks from outside sources, such as the discount window.

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Definitions:

Cash Dividend

A payment made by a company out of its profits to shareholders, usually in the form of cash.

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and a share in the company's profits via dividends.

Available-for-sale Securities

Financial assets that are not classified as held-for-trading or held-to-maturity, and can be sold in the market.

Fair Value

An estimate of the market value of an asset or liability, based on current prices in an active market or valuation models, indicating what a willing buyer and seller would agree to exchange it for.