The climate risk team at a global bank works on a sustainability and climate risk report for a forthcoming company strategy meeting. The meeting will focus on bank goals to achieve net zero GHG emissions by 2050. Bank leaders will discuss potential risk exposures the bank may face, as well as possible financial systemic effects.
Which of the following is an example of how systemic climate risk can translate into liquidity risk for the bank?
Liquidity risk refers to the risk that an entity will not be able to meet its short-term financial obligations due to an inability to convert assets into cash quickly. High levels of deposit withdrawals from households and corporations after a hurricane (option A) would directly impact the bank's liquidity as it would need to provide cash to meet those withdrawals, potentially straining its available liquid assets.
A is correct answer. I dont know who choses the answers at examtopics.
A because Liquidity risk is about losing access to liquidity—the ability to quickly and easily convert assets into cash. Key metrics for liquidity risk include loan-to-deposit ratios (specifically for banks)
A is liquidity, C is underwriting
A is a correct answer on liquidity risk
A is the correct answer