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Off-balance-sheet credit risk of the top 20 Japanese banks


The study of off-balance-sheet (OBS) credit risk across the top 20 Japanese banks indicated that financial derivatives were heavily used by the top four banks and that loan commitments are the largest source of credit risk among traditional OBS instruments. The notional amounts of derivative contracts make up 92 per cent of total OBS activities. There is a wide difference across the banks in the use of derivative leverage. As compared to the US and European banks, Japanese banks use fewer OBS instruments as a percentage of their assets. This implies that Japanese banks are more conservative and risk averse in general than their US or European counterparts, especially given the bad financial condition of the banks and Japan.

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Correspondence to Dara Khambata.

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1holds the Crown Prince of Bahrain Chair in international finance at the Kogod School of Business at American University in Washington DC. He has published various books including ‘The Practice of Multinational Banking’, ‘The Multinational Enterprise in Transition’ and ‘International Business: Theory and Practice’. His papers include ‘Off-balance-sheet exposure of US Banks’ and ‘Off-balancesheet credit risk of the top 20 European commercial banks’.

2received his MBA in finance from the Kogod School of Business at American University in Washington DC in 2003. His studies focused on international finance, risk management and corporate finance. He worked in the finance and marketing departments for automobile and chemical companies in India prior to his MBA. He interned at the International Finance Corporation in Washington DC.

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Khambata, D., Bagdi, R. Off-balance-sheet credit risk of the top 20 Japanese banks. J Bank Regul 5, 57–71 (2003).

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