Banking Practice Showdown 2025 – Vault into Your Future Success!

The correct response is that volatile liabilities are most likely to be withdrawn quickly.

Volatile liabilities refer to deposits that can fluctuate significantly and are often subject to quick withdrawal. They typically include accounts that have variable interest rates or are linked to market conditions, such as certain types of money market accounts or large corporate deposits. Because these funds are often not tied to long-term agreements and are reliant on market-driven interest rates, depositors may withdraw them quickly in response to better offers or changing financial conditions.

In contrast, core deposits, such as checking and savings accounts, tend to remain stable because they involve customers' everyday financial activities and have strong relationships with the bank. Time deposits, or certificates of deposit (CDs), are meant to be held for a specified term, and withdrawing them early usually incurs penalties, thus discouraging quick withdrawals. Savings accounts, while somewhat liquid, also do not experience the same level of fluctuation as volatile liabilities, as they typically maintain a more stable customer base and involve less immediate market interaction.