Question 988 matching principle, bank balance sheet
Which of the below statements about the 'matching principle' and banks is NOT correct?
(a) Long term assets should be funded with long term liabilities according to the matching principle.
(b) Short term liabilities should be funded with short term assets according to the matching principle.
(c) The matching principle helps firms minimise refinancing or rollover risk.
(d) Banks' main assets are cash and their main liabilities are deposits.
(e) Banks do 'maturity transformation', turning short term liabilities into long term assets.
Copyright © 2014 Keith Woodward