Inst Investors, Banks ,LOS i (last paragraph)
Can someone explain this please:
" contrasting commercial banks and retail-oriented banks, commercial banks have a higher cost of funds and lower liquidity because of wholesale funding of loan commitments and other contingent commitments.
Conversely, retail banks have a lower cost of funds and better liquidity because their retail deposits are relatively low cost and tend to be more stable "
Why do commercial banks have a higher cost of funds? Does this mean that the corporations they provide loans to pay a higher rate ?
What does the CFAI text mean by “lower liquidity” - are they referring to the banks need for liquidity or do they mean that the securities commercial banks hold have lower liquidity?
Thanks