20-53 The evaluation of credit risk of off-balance-sheet assets under Basel II requires that the notional amount of OBS items be converted to credit equivalent amounts of on-balance-sheet items.

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This statement is true. Basel II requires that off-balance-sheet (OBS) items be converted to credit equivalent amounts (CEA) of on-balance-sheet (OBS) items in order to evaluate credit risk. This is done because OBS items do not appear on a bank's balance sheet, but can still pose potential credit risks to the bank. The conversion to CEA allows the bank to estimate the potential credit exposure of these items and include them in their overall risk assessment.

20-53 the Evaluation of Credit Risk of Off-Balance-Sheet Assets Under