Notice to recognised banks and licensed deposit-takers issued by the Bank's Banking Supervision Division on 3 April 1985.
Pressures on banks' capital adequacy ratios in recent years have contributed to a significant growth in off balance sheet instruments not all of which are currently captured in the prudential measurement of capital and liquidity. This has led not only to a growth in such new instruments but also to banks taking on such obligations on terms which, in the Bank's view, do not properly reflect the risks involved. The Bank, therefore, wishes to set in train a review, in consultation with banks and other institutions, of the range of off balance sheet risks to which they may be exposed in order to assess those risks more accurately. This review will include the treatment of more traditional and well-established contingent liabilities as well as instruments which have been developed more recently.