The Basic Concepts and Feature of Bank Liquidity and Its Risk

Liquidity is fundamental to the well-being of financial institutions particularly banking. It determines the growth and development of banks as it ensures proper functioning of financial markets. Inadequacy of liquidity causes adverse effect on the market values of asset. Therefore studying and understanding liquidity has very important practical implications. However, understanding the term liquidity is an arduous task due the diversity in its meanings and connotations. This paper attempts to examine different liquidity definitions and the concepts as well as discusses sources of liquidity and its risk.