13-4 Off-balance-sheet activities generally have risk-reducing attributes,but seldom have risk-increasing attributes.

Question

Quizplus · Accepted Answer

Off-balance-sheet activities can have risk-increasing attributes as they involve taking on additional liabilities or exposing the institution to market and credit risks. For example, off-balance-sheet transactions such as credit derivatives and securitizations can increase the institution's exposure to counterparty and credit risks, and off-balance-sheet financing arrangements can increase the institution's leverage and liquidity risks.

13-4 Off-Balance-Sheet Activities Generally Have Risk-Reducing Attributes,but Seldom Have Risk-Increasing