Banks plan to relaunch off balance sheet derivatives units of volume

their off-balance-sheet activities. The last part of the paper (Part V) sets out the Committee’s views on the role of supervisors in monitoring banks’ off-balance-sheet exposures. 7. Attached to this paper is a glossary of terms which is an integral part of the paper and should be read in conjunction with it. The glossary has two purposes.

Accounting for Derivatives Characteristics of Derivatives Once referred to as “off-balance sheet” instruments, now required to be carried on the balance sheet at fair market value Leverage - Subject to significant change in value (potential for gain or loss) with little or no initial investment

The H.8 release is primarily based on data that are reported weekly by a sample of approximately 875 domestically chartered banks and foreign-related institutions. As of December 2009, U.S. branches and agencies of foreign banks accounted for about 60 of the weekly reporters and domestically chartered banks made up the rest of the sample. In contrast, securitization enables banks to remove loans from balance sheets and transfer the credit risk associated with those loans. Therefore, two types of items are of interest: on-balance sheet and off-balance sheet. The former is represented by traditional loans, since banks indicate loans on the asset side of their balance sheets.

Accounting for Derivatives Characteristics of Derivatives Once referred to as “off-balance sheet” instruments, now required to be carried on the balance sheet at fair market value Leverage - Subject to significant change in value (potential for gain or loss) with little or no initial investment Off-balance sheet activities allow banks to generate fee income, and bypass the costs imposed on them by regulatory taxes. The most prominent bank off-balance sheet activity is loan commitments which grew from $520 billion in 1984 to $783 billion in 1988, a 50 percent increase over this five year period (see Table 1 for growth statistics).