Analysis and measurement of off-balance sheet risks in the banking sector

Accounting and finance, among the functions of the business, play a key role in ensuring the success of the business. If these functions do not perform properly, the life of the firm may not survive. While the firm provides the funds it needs thanks to financing, financial information about the business is collected, analyzed, measured, recorded and brought into a format that everyone can benefit from. There are many common areas where finance and accounting sciences are influenced by each other. One of these is off-balance sheet financing. Off-balance sheet financing emerged as a branch of creative accounting and has become one of the important developments in the financial field in the last three decades. The use of off-balance sheet transactions is especially encountered in the banking sector and is performed for various purposes, especially to hide the real leverage status of the firm. Off-balance sheet transactions and their effects on banks are included in both international legislation and national legislation of our country. As the international legislation, the main point is Basel Criteria; Regulations on off-balance sheet transactions have been the most worked area especially after the USA Mortgage Crisis. In parallel with this, the necessary updates in the legislation related to the banking sector in our country are constantly ongoing. Off-balance sheet transactions can have negative consequences on banks both in our country and in other countries. It is obvious that banks, which suffered great losses in the cases of bankrupt banks that led to the 2000 - 2001 Crisis in our country, and which suffered great losses in the 2007 - 2009 Global Financial Crisis, deliberately used off-balance sheet transactions for malicious purposes. In the banking sector, there are bank-specific variables and macro variables that increase or decrease off-balance sheet transactions. Based on the literature, those selected from these variables were analyzed using the Hendry Econometric Method from General to Spesific, and it was investigated which variables would affect the off-balance sheet risk in what direction. The results found are generally compatible with the literature.