Economics, Econometrics and Finance
2 years ago

Off-balance sheet activities linked to higher bank risk, study finds.

Journal of International Financial Markets Institutions and Money
Do traditional off-balance sheet exposures increase bank risk?
Mamiza Haq, David Tripe, Rama Seth

Paper Summary

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Banks' off-balance sheet activities were thought to increase risk, but a study found that larger off-balance sheet exposures actually led to lower overall risk. However, they did increase the chance of extreme risks. The relationship between off-balance sheet activities and risk is not straightforward, and setting strict limits on these activities could make banks take more risks.