Off-balance sheet activities and financial innovation in banking
Keywords:Off-balance sheet operations, financial innovation, banking
Bank’s off-balance sheet operations have grown rapidly in recent years. The ‘off’ balance sheet description denotes that the activities involve contingent commitments or contracts which generate income to a bank, but are not normally captured as assets or liabilities under conventional accounting procedures. The work explores the growth of this phenomenon in a broader context of innovations in financial techniques in banking. The author looks at the nature of off-balance sheet business and compares it with traditional banking operations. The reasons for the growth of these operations as well as their risks are then investigated.
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