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A significant problem for banks is the issue of imbalance of maturity. This occurs if: Assets...

A significant problem for banks is the issue of imbalance of maturity. This occurs if:

Assets (Customer Deposits) have a shorter maturity than Liabilities (Loans to Customers).
Assets (Loans to Customers) have a shorter maturity than Liabilities (Customer Deposits).
Liabilities (Customer Deposits) have a shorter maturity than Assets (Loans to Customers).
Liabilities (Loans to Customers) have a shorter maturity than Assets (Customer Deposits).
Both B and C.
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Answer #1

Option C

For banks customer deposit is liability for the .and loans to customer is asset. Hence option A and D gets eliminated.

If loans to customer have shorter maturity than customer deposit then there is no imbalance of maturity the problem arises when customer deposit has shorter maturity than customer loans. This is because if amount deposited in bank given as loan to some customer then when depositor needs their money back then bank cannot return their money as the money has been given as loan which has higher maturity. In this case bank has to borrow money.

Hence option C is correct.

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