Explanation:
Statement D is false. Under the matched-maturity marginal cost of funds approach, deposits are considered a source of funds (providing liquidity to the bank) rather than a use of funds. Additionally, "sticky" deposits refer to retail or corporate deposits that are behaviorally stable and unlikely to be withdrawn quickly during times of stress, not due to an actual "adhesive agent". Statements A, B, and C are true.
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20.15.2. In regard to the various approaches to liquidity transfer pricing (LTP), each of the following statements is true EXCEPT which is false?
A
The zero cost of funds approach to LTP is a poor practice because it views funding liquidity as free and funding liquidity risk as essentially zero
B
The pooled average cost of funds approach to LTP is likely to undercharge long-term assets and therefore promote unhealthy maturity transformation
C
The matched-maturity marginal cost of funds approach to LTP is best practice but does require the bank to update term liquidity premiums
D
The matched-maturity marginal cost of funds approach to LTP charges deposits as a use of funds but charges "sticky" deposits due to the expense of an adhesive agent
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