Unibank needs to review its liquidity position. According to the head of the division the following information applies:
Existing liquid assets (eg. government securities, CDs, BAB) on the balance sheet: $30 million;
Credit limit in the money market: $5 million;
Existing available cash on the balance sheet: $3 million;
Cash on balance sheet utilised in terms of existing daily operations and in terms of minimum regulatory reserve cash requirements: $1 million (part of the 3 million existing cash on the balance sheet); and
Funds borrowed from the central bank with rediscounting facility: 1.5 million
You are required to use the information above to calculate the net liquidity level of the bank and also provide conclusions about your calculation (1 mark).
What is the net liquidity of the bank? And what conclusions can you derive from the result?