Question

Co-operative banks are rightly leveraged Institutions in the sense that:

• A. Their total liabilities amount to a large multiple of their own funds
• B. Their total assets are several multiples of their own funds
• C. Their loans are mostly unsecured
• D. None of the above

Answer 1

Answer:

A. Their total liabilities amount to a large multiple of their own funds

Co-operative banks are considered highly leveraged because their total assets (loans and advances) are often many times larger than their own funds (capital and reserves). This means they operate with a relatively small base of capital compared to the size of their lending and investment activities. Option A refers to liabilities, but leverage is generally measured in terms of assets relative to own funds, not liabilities.