ACH exposure represents the total financial risk a bank faces due to Automated Clearing House (ACH) transactions involving a specific borrower.
In essence, ACH exposure, as determined at any given date, is the sum of:
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Outstanding ACH Advances: All amounts owed by the borrower to the bank related to ACH transactions where the bank has already advanced funds on the borrower's behalf.
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Potential Future ACH Obligations: The maximum amount the borrower could owe the bank, assuming settlement within a short timeframe (as specified in the reference material -- two days). This component accounts for potential ACH debits that haven't yet settled.
Therefore, ACH exposure considers both current outstanding debts and potential future obligations. This calculation helps banks manage their risk related to ACH transactions.
