Highly liquid assets are not part of the liability profile. The liability profile of a bank is a representation of the bank’s financial obligations, i.e., what the bank owes to others. Highly liquid assets, on the other hand, are assets that can be quickly converted into cash without any significant loss in value. These assets are part of the bank’s asset profile, not its liability profile. They represent resources that the bank owns and can use to meet its financial obligations. Therefore, highly liquid assets are not included in the liability profile.

Choice A is incorrect. Customer individuals are indeed a part of the bank’s liability profile. They represent the deposits made by individual customers, which are liabilities for the bank as they are obligated to return these funds upon demand.

Choice B is incorrect. Highly liquid security repos (repurchase agreements) also form part of a bank’s liability profile. These are short-term borrowing for dealers in government securities and the dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price.

Choice C is incorrect. Asset-backed securities can be part of a bank’s liability profile if they have been issued by the bank itself. In this case, they represent obligations that must be met by generating sufficient returns from the underlying assets.

Things to Remember

• Liability profile is a breakdown of the share of each type of liability at the bank, representing the bank’s financial obligations.
• Highly liquid assets are assets that can be quickly converted into cash without significant loss in value.
• Highly liquid assets are part of the bank’s asset profile, not its liability profile.
• Customer individuals represent deposits made by individual customers, which are liabilities for the bank.