-116-
between the administrative costs adjustments for the current
quarter and the previous quarter was the amount that FNBC claimed
on its books as a portfolio adjustment for the current quarter’s
deferral.
C. Preparation for the Adjustment
The starting point in calculating the administrative costs
adjustment was the swap department’s annual budget, as approved
by the swap department’s senior management. In order to arrive
at the amount of salaries, bonuses, and benefits (collectively,
personnel costs) to allocate to its administrative costs
adjustment calculation, FNBC multiplied its personnel costs by a
fraction. The fraction’s numerator equaled the number of
full-time equivalent employees (FTEs) estimated to be required to
maintain the portfolio to maturity.37 The fraction’s denominator
equaled the total budgeted trading department FTEs. FNBC also
allocated to the management of the existing swap portfolio the
same percentage of direct costs.
The number of FTEs estimated necessary to maintain the
current portfolio to maturity changed during the relevant years
as shown below:
37 The finance department ascertained the level of staffing
needed to manage the existing portfolio by interviewing primarily
the head of the trading desk.
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