Off-balance-sheet business refers to the business activities of commercial banks that are not included in the balance sheet according to the current accounting standards and do not affect their total assets and liabilities, but can affect the bank's current profits and losses and change the bank's return on assets. Off-balance sheet business can be divided into narrow sense and broad sense. In a narrow sense, off-balance sheet business refers to those businesses that are not included in the balance sheet.
However, it is closely related to on-balance-sheet asset business or liability business. Off-balance-sheet business in a broad sense includes not only off-balance-sheet business in a narrow sense, but also settlement, agency, consulting and other businesses. Off-balance sheet items are also called contingent liabilities and contingent assets, or contingent assets and liabilities. The so-called off-balance sheet business refers to the business that commercial banks are engaged in.
According to the current accounting standards, it is not included in the balance sheet, and it does not affect the total assets and liabilities, but it can affect the bank's current profits and losses and change the bank's asset return rate. In a narrow sense, off-balance sheet business refers to those business activities that are not included in the balance sheet, but are closely related to on-balance sheet asset business and liability business, and will be transformed into on-balance sheet asset business and liability business under certain conditions.
Narrow sense of off-balance-sheet business characteristics:
1, various forms.
Banks are very flexible in off-balance-sheet business operations and can assume multiple roles at the same time. It can not only provide risk-free financial intermediary services, but also provide high-risk financial derivatives market, which can not only directly participate in financial market operations, but also act as an intermediary in financial markets.
2. Risk is complex and uncertain.
Off-balance-sheet business usually has multiple risks at the same time, including credit risk, market risk, liquidity risk and other risks. The control of off-balance-sheet business risks needs to be grasped in all directions, and the substitution relationship between risks is also very complicated. Contingent assets can be formed, or they may be transformed into off-balance-sheet business for various reasons, which makes bank operations in trouble.
According to the current accounting system, except a few off-balance-sheet businesses are reflected in the form of notes, most off-balance-sheet businesses are not directly reflected in the balance sheet. This makes the financial statements unable to truly reflect the scale and quality of banking business, with great freedom and high potential risks. Many off-balance-sheet businesses are not strictly restricted by financial regulations.