Banking · Risk Management
A bank issues a Deferred Payment Guarantee (DPG) for a period of seven years to a machinery supplier. Under the standard accounting aspects of loan products, how is this DPG treated?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1As an off-balance sheet item that requires no provisioning or regulatory reporting
- 2As a non-funded credit facility/contingent liability recorded with a potential impact on the CAR via credit conversion factors✓
- 3As a funded loan exposure that immediately impacts the Capital Adequacy Ratio
- 4As a contingent liability shown as an asset on the balance sheet
Correct answer
As a non-funded credit facility/contingent liability recorded with a potential impact on the CAR via credit conversion factors
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