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1 The time deposits with banks had stated maturities of less
than 180 days, and often less than 61 days. All the time
deposits were in exact multiples of $1 million, and the majority
of the obligors were foreign banks. Petitioner's records showed
the CD's as having originated from the following foreign centers:
The Cayman Islands, Nassau, Toronto, Zurich, London, and
Frankfurt.
2 The CD's with banks had stated maturities of 9 months to 1
year. All the CD's were in exact multiples of $1 million, and
the majority of the obligors were foreign banks. Each CD was
denominated either "Yankee" or "Euro".
3 The amounts agreed upon by the parties with respect to
loans have been adjusted to remove all amounts in respect of
obligations of local governments.
4 The total amounts of interest included in the accruals
include loans due and payable in 1986 on which principal and
interest remained unpaid at yearend.
None of the short-term obligations held by IFNB at yearend
1986 had been previously issued and then acquired by IFNB from
third parties (i.e., from parties other than the borrower,
debtor, or obligor). The only obligations acquired by IFNB from
third parties were long-term corporate bonds and U.S. Government
securities, none of which are in issue in this matter.
Petitioner supports its assertion that IFNB originated the
short-term obligations at issue here in the ordinary course of
its banking business, by stating that IFNB relied upon the
borrower's good faith and credit--along with any collateral used
to secure the loan--to repay the resulting obligation. Although
(as discussed below) respondent asserts that the time deposits
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