The advantages of this strategy is

Over-dependence on one source of funding increases the liquidity risk in the future, excessive dependence on bank liability management may weaken the criteria for asset management, that is, to a large concentration of short-term obligations will be the main source of financing long-term assets, the cost of borrowing increases undefined uncertainty of the net profit of the bank, the cost of such assets can increase dramatically due to increased competition, trying to compensate for this increase, the bank may loosen credit and invest in risky securities, which, respectively, increases the risk of active operations, the bank attracted additional funding for assets already shown in its balance sheet, such an increase in the cost of resources may lead to a decrease in net spread and net interest margin, if the bank is trying to raise funds with the lowest cost, paying no attention to the definition of maturity, the interest rate risk is greatly increased. The high cost of asset transformation strategy and the significant risk-taking strategy of borrowing, most banks opt for a compromise version of the liquidity management - the strategy of sustainable management of liquidity. The method of balanced liquidity - this is a compromise version of the liquidity management, which involves the simultaneous use of two previous methods, that is part of the demand for liquid assets is met by the accumulation of liquid assets, and the rest - at the expense of the operations of borrowing money. The balanced management of liquidity to manage its liquidity risk by coordinating the decisions concerning the sources of recruitment and placement of lines on the volume and timing to ensure the profitability of banking operations. According to this method in case of deterioration of liquidity banks should take the following steps: step up efforts to increase the number of paying customers, intensify efforts to expand deposit operations; to borrow in the interbank (inter-branch) of the market of credit resources, introduce new services, to conduct an advertising campaign, to reduce lending, to intensify the repayment of outstanding loans and long-acting, make an inventory of accounts receivable; to establish a pool of liquidity in the form of debt securities issued or refinanced NBU. Category: Management Operations Commercial Bank