-126-
December 31, 1993;44 (2) $264,418 arose from transactions with
counterparties rated AA or better; (3) $94,421 arose from swaps
that had a tenor of 9 months or less;45 (4) $167,109 arose from
swaps on which FNBC did not expect to be the net receiver of
cash; and (5) at least $6,338 arose from swaps that were known to
have the risk of nonpayment of cashflows offset, in full or in
part, by other swaps with the same counterparty.
When FNBC reported credit adjustments on swaps where it had
more than one swap with the same counterparty, FNBC did not check
to see whether the swaps were mirror or partially offsetting
swaps. Credit risk credit adjustments should not be taken on
mirror swaps. Credit risk also is reduced on partially
offsetting swaps.46
44 Of the 488 swaps, 55 had a stated maturity of on or
before Dec. 31, 1993, and 47 of them terminated on or before
Dec. 20, 1993. For 1993, the initial credit adjustments claimed
for those 55 swaps totaled $93,203.
45 Sixty-three of the 488 swaps had tenors of 9 months or
less. No credit adjustment was claimed on 12 of these 63 swaps.
FNBC reported initial credit adjustments totaling $94,421 on the
remaining 51 transactions and amortized those adjustments over
the following periods:
Quarter of Amortization
Deemed Origination Period (months)
1st 39
2d 33
3d 45
4th 90
46 A partially offsetting swap is a swap that offsets, in
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