Consider an FI with the following off-balance-sheet items: A two-year loan commitment with a face value of $120 million, a standby letter of credit with a face value of $20m and trade-related letters of credit with a face value of $70 million. What is the total credit equivalent amount?

Question

Quizplus · Accepted Answer

The credit equivalent amount is calculated by applying credit conversion factors to off-balance-sheet items: 50% for loan commitments, 50% for standby letters of credit, and 20% for trade-related letters of credit. Thus, $120m * 50% + $20m * 50% + $70m * 20% = $60m + $10m + $14m = $94 million.

Consider an FI with the Following Off-Balance-Sheet Items: a Two-Year