The use of off-balance-sheet activities and instruments will always reduce the risk to a bank.

Question

Quizplus · Accepted Answer

The use of off-balance-sheet activities and instruments may not always reduce the risk to a bank. In fact, it can increase risk if the bank does not properly manage and disclose these activities. Off-balance-sheet activities and instruments include things like derivatives, loan commitments, and letters of credit. While they can provide benefits such as increased flexibility and profitability, they also involve potential risks such as credit, market, and operational risks. It's important for banks to have strong risk management policies and robust disclosure practices to mitigate these risks.

The Use of Off-Balance-Sheet Activities and Instruments Will Always Reduce