Question

Discuss how an OBS activity moves onto the balance sheet as an asset or liability and...

Discuss how an OBS activity moves onto the balance sheet as an asset or liability and discuss the risks and benefits of OBS activities to a bank.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

OBS- Off balance sheet transaction are the assets and liabilities that do not appear in the balance sheet of the companies.

Some examples of off balance sheet transactions- Are as following:

  1. Issuance of guarantee
  2. Letter of credit
  3. Operating lease

Risk of OBS activities to a bank- Banks have credit risk and defailt risk at customers' end. If banks move off balance sheet transactions to the balance sheet, it will have impact on interest rates and exchange rates.

Benefits of OBS activities to a bank- Banks can avoide reserve requirements, they do not have to raise more funds. Banks can decrease their debt ratio and increase the profitability.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What types of activities are normally classified as off-balance-sheet (OBS) activities?
What types of activities are normally classified as off-balance-sheet (OBS) activities?
discuss the effect of disposal of asset in company's balance sheet as well as consequences of...
discuss the effect of disposal of asset in company's balance sheet as well as consequences of relying on revenue from overseas operation in probable effect on income statement.how the activities undertaken by companies reflect stock price
How does a company measure the net pension benefit liability (asset) to report on the balance...
How does a company measure the net pension benefit liability (asset) to report on the balance sheet under IFRS and U.S. GAAP?
A company is required to report a liability in its balance sheet when it expects to...
A company is required to report a liability in its balance sheet when it expects to lose a law suit and the amount of the expected loss can be reasonably estimated. Conversely, a company is prohibited from reporting a receivable in its balance sheet when it expects to win a lawsuit even though it is probably and the amount of the expected gain can be reasonably estimated. Required: Does the expected loss meet the definition of a liability found in...
In 200 words or more, discuss issues that pertain to consolidations from an asset or liability...
In 200 words or more, discuss issues that pertain to consolidations from an asset or liability valuation standpoint. For example, how is goodwill valued on a company’s books?
What is the Asset Section of the Balance Sheet trying to communicate? How would you explain...
What is the Asset Section of the Balance Sheet trying to communicate? How would you explain 1) what assets are; and 2) what their valuation represents?
Curry Co. has several deferred tax balances on their balance sheet; $100,000 deferred asset retaled to...
Curry Co. has several deferred tax balances on their balance sheet; $100,000 deferred asset retaled to bad expense; $600,000 deferred tax liability related to depreciation; $200,000 deferred tax asset related to a new operating loss, which is expected to reverse in the next 12 months. What categories of deferred tax assets/liabilites will the Company have on its balance sheet? ?A. Current deferred tax assets ?B. Non Current deferred tax assets ?C. Current deferred ta assets and non current deferred tax...
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.
The following items are a simplified version of recent balance sheet data relating to the Reserve...
The following items are a simplified version of recent balance sheet data relating to the Reserve Bank of Australia: Government securities $50bn Government balance $45bn Exchange settlement account balances $30bn Net foreign currency reserves (and gold) $70bn Other assets $2bn Currency at issue $60bn Accounts due to foreign central banks and others $10bn Loans to private banks $40bn 1. Classify each of the above individually as either an asset or a liability of the Reserve Bank of Australia.                                                                                                                                       2. Draw...
What challenges did the banking system face with its asset side of its balance sheet during...
What challenges did the banking system face with its asset side of its balance sheet during the 2007-9 housing crisis? What were the contributing factors to the qualitative change in assets? What types of assistance might the Central Bank provide during a crisis to avert bank insolvency? How does this work?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT