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THE SHIFTABILITY THEORY


Along grows it function of banking in economics grows also the management of bank liquidity theory from
commercial loan theory to shiftability theory. Shiftability theory yells that level of defensible bank
liquidity if having possession or invests legal capital in presentation of possession capable to shift sonly at
other investment in obtaining liquid equipments. Like loan becomes secondary back up, secondary back
up shifts becoming primary back up. This means shiftability theory suggests bank to give loan paid with
notification before all applies commercial paper pawn. Thereby is explaining shiftability theory to run in
financial market, which has growled, and active.
If (when there are no hard cash, hence bank sells pawn goods to loan causing obtained cash that is
enough. The friction, happened because collateral which illiquid turns into liquid. Besides done said bank
also often sells securities that marketable like selling super common stock. From the matter,
comprehended shiftability theory to give description and confidence of management of bank until certain
degree of removable bank possession in condition of needed to fulfill liquidity. However, weakness also
critically expressed. Follows suggestion shiftability theory to result the happening of hit because goods
retreat and or securities exchange rate, more than anything else when happened forced selling and forced
liquidation. Bess awaiting what suggestion! Suggestion that (the intention? Shiftability theory suggests
liquidity overcome [by] through friction of presentation of asset

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In banking, Shiftability is an approach to keep banks liquid by supporting the shifting of assets.
When a bank is short of ready money, it is able to sell orrepo its assets to a more liquid bank. The
approach lets the system of banks run more efficiently: with fewer reserves or investing in long-term
assets.Note that shiftability is a property of the banking system, not an individual bank. Individual
banks have always handled Liquidity crises by attempting to sell or repo assets. In many banking
systems, they do so only at fire sale prices. Under shiftability, the banking system tries to avoid
liquidity crises by enabling banks to always sell or repo at good prices.Shiftability allowed early
American banks to stay liquid when investing in longer-terms investments, like railroad construction,
when British banks were only invested in short-term commercial paper.

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SHIFTABILITY THEORY OF LIQUIDITY

An explanation of bank liquidity that holds that a banks capacity to meet liquidity demands is related
to the volume of its assets that can be readily shifted to another bank.