Increasing investments in real estate is not a viable strategy for boosting liquidity in a financial institution. While such investments may enhance the solvency status of the bank, they do not directly contribute to its liquidity. Liquidity refers to the ability of an institution to meet its short-term obligations, which requires readily available funds. Real estate investments, on the other hand, are typically long-term and illiquid, meaning they cannot be quickly converted into cash without potentially incurring a significant loss. Therefore, increasing investments in real estate would not effectively address the liquidity concerns of the institution.

Choice A is incorrect. Liquidation of trading book positions can indeed enhance the liquidity of a financial institution. Trading book positions are typically composed of financial instruments that can be easily sold or bought in the market, thus providing immediate liquidity.

Choice B is incorrect. Holding cash and treasury securities is another effective strategy for enhancing an institution's liquidity. Cash is the most liquid asset, and treasury securities are highly liquid due to their strong demand in the market.

Choice D is incorrect. The ability to borrow money at short notice also contributes to an institution's liquidity position. This strategy ensures that even if there are unexpected cash outflows, the institution can quickly secure funds to meet its obligations.

Things to Remember

• Liquidity management is crucial for financial institutions to ensure they can meet their short-term obligations.
• Real estate investments are typically long-term and illiquid, making them unsuitable for boosting liquidity.
• Trading book positions consist of easily tradable financial instruments that can enhance liquidity when liquidated.