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What is meant by the term "off-balance sheet lending"?

What is meant by the term "off-balance sheet lending"?

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INTRODUCTION. Off-balance sheet activities include items such as loan commitments, letters of credit, and revolving underwriting facilities. Institutions are required to report off-balance sheet items in conformance with Call Report Instructions.

Off-balance sheet (OBS) financing is an accounting practice whereby a company does not include a liability on its balance sheet. It is used to impact a company's level of debt and liability. The practice has been denigrated by some since it was exposed as a key strategy of the ill-fated energy giant Enron.

Most commonly known examples of off-balance-sheet items include research and development partnerships, joint ventures, and operating leases. Among the above examples, operating leases are the most common examples of off-balance-sheet financing.

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