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# Bank Liquidity Management

## Definition

The practices by which banks maintain sufficient ready assets to meet demands for note redemption and other obligations while maximising their ability to provide credit. Effective liquidity management is crucial for banking stability.

## Source Chapter

Book II, Chapter 2

## Context

Smith analyses how banks must manage their liquidity to meet demands while maintaining profitability. He shows how liquidity management affects bank stability and the broader economy, particularly during periods of financial stress.

## Economic Domain

Regulation

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