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An example of off balance sheet activity includes: lending money to a depositor. borrowing from another...

An example of off balance sheet activity includes:

lending money to a depositor.

borrowing from another bank.

borrowing from the Federal Reserve.

purchasing a futures contract.
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Answer #1

Option (d) is correct

Off balance sheet activity includes purchasing a futures contract. Off balance sheet activity means and includes those items that do not appear in the balance sheet. This may be due to the fact that the business do not own it directly or business do not have any direct obligation to pay them now. But these activities or items may have future impacts on the balance sheet. In futures contract, the real transaction will take place in the future, it will not impact current balance sheet. So it will appear as an off balance sheet item.

Other options given in point (a), (b), (c) are not off balance sheet activities. They are simply borrowing and lending transactions that affect the current balance sheet, so they will appear in the balance sheet.

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