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office personnel costs to the management of its portfolio. FNBC
also allocated to the management of its portfolio 8.33 percent of
the related direct costs.
The swap department’s annual budget included as “indirect
costs” amounts that were charged to the swap department by other
areas of the bank. The finance department conducted interviews
to determine what percentage of each item was attributable to the
management of the existing swap portfolio. The percentages used
for 1993 were 62 percent of the credit department costs, 25
percent of legal services, 50 percent of audit and finance, 0
percent of R&D, 0 percent of marketing, and 0 percent of
corporate utilities. FNBC also charged to the swaps department
the indirect costs of additional departments.
The total of all of the expenses attributable to the
management of FNBC’s existing swap portfolio represented FNBC’s
estimate of the total costs of administering its existing swap
portfolio for the upcoming year.
D. Expenses Included in the Adjustment
1. Direct and Indirect Budgeted Costs
The direct and indirect costs of the swap front office used
to calculate the administrative costs adjustment included office
rent, traders’ salaries and bonuses, all front office expenses,
certain miscellaneous costs, costs connected with the Devon
system, and retirement and other benefits for front office swap
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