P/L non-neutrality

It is intuitively clear that it is the task of every liquidity manager to minimize the risk
of being insolvent for his or her institution. He achieves this by accomplishing the
highest possible liquidity for his institution. So far so good, but as always there is a
trade-off: liquidity is not free. Maximizing CFò as well as minimizing CFñ puts
restrictions on the businesses that normally result in smaller profits or even losses.
Ensuring CFñ does not fall below a certain threshold triggers direct costs in general.3
As a consequence, liquidity management turns out to be the task of maximizing the
liquidity of the bank under the constraint of minimizing costs.