Académique Documents
Professionnel Documents
Culture Documents
ACTIVITIES
Loan
Sales
Fee Income
Trust
Accounts
Letter of
Credit
Involves a contract
that sells all or part of
the cash stream from
a specific loan and
thereby removes the
loan from the banks
balance sheet.
LOAN
SALES
GENERATION OF FEE
INCOME
LOAN COMMITMENT
OVERDRAFT PRIVILEGES
EXPOSURE TO RISK
Off-balance-sheet
activities
involving
guarantees
of
securities and backup
credit lines increase
the risk a bank faces.
EvenEXPOSURE
though
a
TO
guaranteed security
does not appear on a
bank balance sheet,
it still exposes the
bank to default risk: If
the issuer of the
security defaults, the
bank is left holding
the bag and must pay
off
the
securitys
owner.
RISK
EXPOSURE TO RISK
10
TRADING
ACTIVITIES
Trading activities, although often highly
profitable, are dangerous because they make
it easy for financial institutions and their
employees to make huge bets quickly.
A particular problem for management of
trading activities is that the principal-agent
problem is especially severe.
PRINCIPALAGENT
PROBLEM
PRINCIPALAGENT
PROBLEM
13
Managers of financial
institutions must set
up internal controls to
prevent debacles
Managers must also
scrutinize risk
assessment procedures
using the latest
computer technology
OFF
Balance Sheet
Activities of
Commercial
Banks in the
Philippines
16
Payments and
Fiduciary
Trade related
Investment
accounts
guarantees and operations which banking related safekeeping
which consists of bill
refer
to
the
banks
foreign
accounts.
for collection other
trust accounts
exchange
than those
and managed
administered by the
services.
funds.
trust department.
TRUST
ACCOUNTS
Under trust, the trustee has the general
authority and responsibility to administer
and manage trust account.
The bank itself formulates policies regarding
the investment and disposition of funds
subject to restrictions provided in the
agreement.
TRUST
ACCOUNTS
Trust accounts are also suspected of being
increasingly used to engage in normal
banking activities on an off balance sheet
basis.
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