Disaggregated Assessment of the Status of Off‐Balance Sheet Items in Selected Banks During the Period 1397-: A Case Study of the Default Rate

Document Type : Original Article

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Faculty of Islamic Studies and Economics, Imam Sadegh University. tehran. iran

Abstract

Off-balance sheet items in banks, including contingent and potential obligations, play a key role in modern banking business. The expansion of off-balance sheet items through the use of committed financial instruments can lead to more accurate targeting and broader inclusion of non-cash banking facilities, thereby improving credit fairness. On the other hand, off-balance sheet items have always been a source of hidden credit risks and have played a crucial role in major financial crises over the past 20 years. The composition of these items varies greatly across different countries, but in Iran, the composition mainly includes guarantees and domestic letters of credit. This study disaggregates the trend of growth and default rate of off-balance sheet items of selected banks during the period 1398 to 1402. For this purpose, micro-level data from the balance sheets of selected banks, including both public and private banks, has been utilized, and the trend in growth, composition, and default rate of these items has been analyzed. Findings show that the ratio of off-balance sheet items to total assets of the banking network has shown an upward trend during this period, increasing from 18% in 1399 to more than 28% in 1403. Among these, guarantees accounted for the largest share of obligations, and the default rate of guarantees was significantly lower compared to letters of credit.

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Applied Researches in
Volume 2, Issue 1 - Serial Number 3
November 2025
Pages 1-28

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