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Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition by Youssef F. Bissada, Jean Dermine

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Weighting system for off-balance sheet items

Guarantees are simply weighted by a credit conversion factor to measure the loss of the bank if the guarantee was called in.

GuaranteesCredit conversion factor
1.Direct credit substitutes (standby letters of credit)100%
2.Short-term self-liquidating trade-related contingency20%
3.Asset sale with recourse100%
4.Note issuance facilities (NIF)50%

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