What is meant by Off-Balance Sheet exposures of Banks?

Off-Balance Sheet exposures are contingent in nature. Where banks issue guarantees, committed or back up credit lines, letter of credit etc., bank face payment obligations contingent upon some event. These contingencies adversely affect the revenue generation of banks. Banks may also have contingent assets. For example, a bank may have purchased insurance to protect against certain negative events. Here banks are the beneficiaries subject to certain contingencies, derivatives are off-balance sheet market exposures. They may be swaps, futures, forward contracts, foreign currency contracts, options etc.