How can non-banks hold liquid assets

Question

BlackTom AI · Accepted Answer

When considering how non-banks can hold liquid assets, it helps to evaluate the liquidity characteristics and typical asset classes involved.
Option: Recycling. This term is vague here and does not specify a liquid asset held by non-banks; recycling as a concept does not denote a liquid store of value or readily tradable asset in this context, so it does not answer the question.
Option: Credit Card lending. This represents a type of loan activity rather than a liquid asset held by non-banks. Credit card loans are relatively illiquid and involve credit risk and interest income, not a liquid asset that can be quickly converted to cash.
Option: Deposits at banks. This is a classic example of a liquid asset for non-banks: cash held in deposits or similar near-cash instruments at banks can typically be withdrawn or transferred with little loss of value, making it an appropriate liquid asset.
Option: Mortgage lending. Mortgage lending is a long-term illiquid asset class; selling or securitizing mortgage loans involves complexity and time, not the ease of converting to cash, so it does not constitute a liquid asset held by non-banks.
Thus, among the given choices, deposits at banks best fit the idea of liquid assets that non-banks can hold, while the others describe less liquid or non-asset concepts.

25751 Financial Institution Management - Spring 2025 Week 8 Quiz

How can non-banks hold liquid assets

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