Abstract
Banks’ off-balance sheet activities are among the many factors blamed for the risk-taking that led to the 2007–2008 financial crisis. We test whether and how off-balance sheet exposures influenced risk-taking at publicly traded commercial banks in the G-7 countries between 1998 and 2018. Contrary to expectations, we find strong evidence that larger off-balance sheet exposures are associated with lower aggregate and idiosyncratic risk but higher tail risk. Further, we observe a non-linear relationship between off-balance sheet activities and risk. Our results suggest that placing absolute limits on OBS activities might increase bank risk-taking.
Original language | English |
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Article number | 101627 |
Journal | Journal of International Financial Markets, Institutions & Money |
Volume | 80 |
Number of pages | 22 |
ISSN | 1042-4431 |
DOIs | |
Publication status | Published - Sept 2022 |
Bibliographical note
Epub ahead of print. Published online: 6 August 2022.Keywords
- Bank risk
- Off-balance sheet items
- Financial crisis
- G-7 countries