Your task is to inform the board about the reasons for and implications of excess liquidity, outline various potential strategies that the bank could employ to manage and thus reduce excess liquidity stating any potential downsides, and then state your preferred strategy and your rationale for this choice.
Outline the circumstances that have contributed to the unusually high levels of liquidity in the Australian Banking Sector.
Benefit/Cost Assessment: Outline the potential benefits and the costs of having surplus liquidity and the strategic challenges it raises for bank executives.
Discuss potential strategies for the management of the surplus liquidity a. Also mention any downsides to those strategies, such as concerns that could be raised by APRA, adverse customer reactions, negative impacts on bank performance etc.
State your preferred strategy for the management of this liquidity and the rationale for your choice.
