-120-
which maintained the floors, etc., for FNBC’s building, and
charges for maintenance of electronic and computer equipment;
(6) charges for data processing systems, virtual memory and
mainframe computer systems; (7) charges from FNBC’s commercial
bank credit area; (8) charges from FNBC’s internal mail and
corporate staff; (9) charges from FNBC’s internal audit
department and finance department; and (10) charges for high
level expenditures for top level executives such as, but not
necessarily, a corporate jet.
XI. FNBC’s Credit Adjustment
A. Overview
At the inception of each swap, FNBC (through its finance
department) determined an initial credit adjustment for that
swap. While the midmarket values for each swap were recalculated
annually to determine yearend swap values, FNBC never
recalculated its credit adjustments for its swaps.
1. Initial and Subsequent Methods
For the relevant years, FNBC used two different methods to
calculate its credit adjustments. It used one method from 1990
through the third quarter of 1992. It used a second method for
new swaps that arose in the fourth quarter of 1992 through 1993.
As to the two methods, FNBC considered the first method to be the
more accurate but also believed that the first method was more
error prone.
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