Answer: BankQ

Bank Q is most vulnerable to a liquidity crisis due to its highest dependence on short-term repo financing. The proportion of assets pledged as collateral is a key indicator of liquidity risk. If repo creditors become concerned about a bank's solvency and decide not to renew their positions, the bank may struggle to raise sufficient cash quickly, potentially leading to a crisis. In such a scenario, the bank might be forced to sell its assets at a discounted price in a hurry, known as a fire sale. This could further lower the market valuation of securities not sold, reducing the amount of cash that could be raised through repurchase agreements collateralized by those securities. Since Bank Q has the largest percentage of its assets pledged as collateral among the four banks, it faces the greatest risk in the event of a liquidity crisis.

Author: LeetQuiz Editorial Team