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      Question

      Under the specific valuation rules for On-Balance Sheet

      items, when is asset netting explicitly permitted?
      A For any corporate loan asset that is backed by prime commercial real estate collateral Correct Answer Incorrect Answer
      B Only for specific assets where dedicated provisions for depreciation or for bad and doubtful debts have been accounted for Correct Answer Incorrect Answer
      C For concentrated exposures that involve implicit sovereign guarantees from provincial state governments Correct Answer Incorrect Answer
      D Whenever the applied credit conversion factor on the asset exceeds 50% Correct Answer Incorrect Answer
      E Netting is strictly prohibited for all funded on-balance sheet items under concentration rules Correct Answer Incorrect Answer

      Solution

      On-balance sheet items are reckoned at their total outstanding values. Asset value netting is strictly confined and allowed only for those asset classes where formal accounting provisions for depreciation or for bad and doubtful debts have already been factored in.

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