Explanation:
Restricted (or trapped) liquidity refers to liquid assets or cash that are not readily accessible or transferable for the general funding needs of the parent bank. Examples of restricted liquidity include assets held in special purpose vehicles (SPVs), restricted cash required for reserves, or trapped liquidity located in foreign subsidiaries constrained by local regulations or capital controls. Option C perfectly illustrates restricted liquidity. By contrast, Option D describes "encumbered" assets (assets currently pledged as collateral). Option A describes operational or primary liquidity. Option B refers to strategic or secondary reserves.
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A
High-quality liquid assets required to fund the bank’s day-to-day operations
B
Cash and money-market instruments allocated to finance the bank’s expansion into new geographic regions
C
A position in mortgage-backed securities held within a special purpose vehicle established by the bank
D
US Treasury notes pledged as collateral against a large wholesale loan taken by the bank