-101-
issuances, letters of credit, loans, financial derivative
transactions).
5. Credit Officers
An FNBC credit officer was assigned to each swap
counterparty. Before a swap could be entered into with that
counterparty, the credit officer had to approve the
counterparty’s credit and give the counterparty a credit exposure
limit (credit line). Credit officers did not work in the swap
department and were not part of the group that included swap
traders and marketers. Nor was the credit approval process a
function of the swap traders and marketers.
The credit line for financial derivative products was known
as the variable exposure product (VEP) limit (VEPL). If a VEPL
had already been established for a counterparty, and a new swap
was within that limit, then no additional credit approval was
needed. If the credit exposure of a swap exceeded the available
VEPL, or if no VEPL had been approved, then the trader had to
obtain credit approval from the credit officer.
D. Weak Credit Rating
FNBC was a major participant in the swaps market during the
relevant years but was considered in that market to have weak
credit. FNBC’s credit rating was downgraded to A- in or about
the fall of 1990. This downgrade was generally viewed poorly
among persons or entities dealing with or considering dealing
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