Question

Which of the following is NOT a main risk faced by US Community Banks?

Liquidity Risk

Interest Rate Risk

Sovereign Risk

Credit Risk

Answer 1

A number of recent cases indicate that an insufficient level of unencumbered liquid assets can compound liquidity troubles. Overall trends indicate that some community banks are experiencing a drop in liquid asset levels.

Interest rate risk is something that affects most banks, hence community banks aren't an exception.

Credit risk is closely associated with liquidity risk, hence community banks have some amount of credit risk as well.

Hence, the sovereign risk is the One risk that isn't associated with the US Community banks.

This is because there isn't a major country risk for USA.