Question

​Off-balance-sheet activities are

a. activities that take place outside the​ bank, such as operations with​ ATMs, electronic banking and so on

b. activities that do not affect a​ bank's balance sheet because they do not change either the​ bank's assets or its liabilities.

c. activities that are illegal and cannot be reflected in a​ bank's balance sheet.

d. activities that do not affect a​ bank's balance sheet because they do not increase a​ bank's profit.

Which from the following are​ off-balance-sheet activities? ​(Check all that​ apply.)

- trading activities

- increase in reverse requirements

- issuing credits

- loan committment

- standby letters of credit

- loan sales

Standby letters of credit are

a. a​ bank's consent to provide a borrower with a stated amount of funds during some specified time.

b. a promise by a bank to lend​ funds, if​ necessary, to the seller of commercial paper at the time that the commercial paper matures.

c. a financial contract in which a bank agrees to sell the expected future returns from an underlying bank loan to a third party.  

d. activities that include trading in the​ futures, options, or swaps market.  

Loan commitment is

a. a financial contract in which a bank agrees to sell the expected future returns from an underlying bank loan to a third party. 

b. a promise by a bank to lend​ funds, if​ necessary, to the seller of commercial paper at the time that the commercial paper matures.  

c. activities that include trading in the​ futures, options, or swaps market.  

d. a​ bank's consent to provide a borrower with a stated amount of funds during some specified time.  

Loan sales is

a. a promise by a bank to lend​ funds, if​ necessary, to the seller of commercial paper at the time that the commercial paper matures.

b. a financial contract in which a bank agrees to sell the expected future returns from an underlying bank loan to a third party. 

c. activities that include trading in the​ futures, options, or swaps market.

d. a​ bank's consent to provide a borrower with a stated amount of funds during some specified time.  

Trading activities are

a. a​ bank's consent to provide a borrower with a stated amount of funds during some specified time.  

b. activities that include trading in the​ futures, options, or swaps market.  

c. a promise by a bank to lend​ funds, if​ necessary, to the seller of commercial paper at the time that the commercial paper matures.

d. a financial contract in which a bank agrees to sell the expected future returns from an underlying bank loan to a third party.  

 

 

Answer 1

​Off-balance-sheet activities do not appear on a company's balance sheet. Although not recorded on the balance sheet, they are still assets and liabilities of the company. These are the activities that do not affect a bank's balance sheet because they do not change either the bank's assets or its liabilities. The answer is b

Off-balance-sheet activities are financial services which earn revenue but do not directly or immediately put assets or liabilities on the balance sheet.The following are​ off-balance-sheet activities:loan committment,standby letters of credit, loan sales

Standby letters of credit is a legal document that guarantees a bank's commitment of payment to a seller in the event that the buyer or the bank's client defaults on the agreement. Standby letters of credit is a promise by a bank to lend​ funds, if​ necessary, to the seller of commercial paper at the time that the commercial paper matures. The answer is b

Loan commitment is a bank's consent to provide a borrower with a stated amount of funds during some specified time. The answer is d