Banking Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

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Which statement best describes a bank's core deposits?

Vault cash

Stable deposits that are not typically withdrawn over short periods

A bank's core deposits refer to stable funds that customers deposit into the bank, which are typically not withdrawn over short periods. These deposits are crucial for a bank's financial stability because they provide a reliable source of funding that the bank can use for lending and investment activities. Core deposits usually include savings accounts, checking accounts, and certificates of deposit that have longer maturities.

The reliability of core deposits allows banks to manage their liquidity more effectively and plan for future lending opportunities. In contrast, other forms of deposits or funding, such as volatile wholesale funding or deposits that may be withdrawn rapidly in response to interest rate changes, do not provide the same level of stability. This characteristic of core deposits makes them an essential element in a bank's overall strategy to maintain a balanced and sustainable financial position.

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The bank's deposits at the Federal Reserve

Most interest rate sensitive liabilities

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