Safety

·                                 One of the most attractive features of the Treasury bill is the safety that it provides. When you invest in Treasury bills, you get the assurance that comes with putting money into a government investment. This means that the Treasury bill is backed up by the credit of the United States government. Unless you feel like the government could collapse, you have a relatively safe form of investment to put your money into, which can earn competitive returns.

Convenience and Tax Savings

·                                 When you want to buy Treasury bills, the process for doing so is very simple. Depending on what type of bill you want to purchase, you may be able to simply get on the United States Treasury website and make an order. In some cases, you have to work with a broker and bid on what you want. Besides the convenience of buying the bills, you also get the benefit of saving money on state and local taxes. The profits you earn from investing are exempt from these types of taxes.

Low Returns

·                                 In the world of investment, when you get security, you have to give up some return. This is the case with Treasury bonds as well. When you invest in treasuries, you typically get a very low return on your investment. You might be able to beat the returns with CDs and high-yield savings accounts. You can definitely do better by putting your money into stocks or corporate bonds, in many cases. In some cases, you might not even keep up with inflation.

Limited Access

·                                 Another potential problem with this type of investment is that you cannot get your money out until the maturity date. If you need your money before the maturity date, you may have to pay a penalty. This means that all of your original investment may not be returned to you, depending on when you take the money out. If you need access to the money, you would be better off to put it into a bank account.

 liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit).

Asset liquidity - An asset cannot be sold due to lack of liquidity in the market - essentially a sub-set of market risk. This can be accounted for by:

§                     Widening bid/offer spread

§                     Making explicit liquidity reserves

§                     Lengthening holding period for VaR calculations

Funding liquidity - Risk that liabilities:

§                     Cannot be met when they fall due

§                     Can only be met at an uneconomic price

§                     Can be name-specific or systemic

The capital requirement is a bank regulation, which sets a framework on how banks and depository institutions must handle their capital. The categorization of assets and capital is highly standardized so that it can be risk weighted