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confidence level. Each of the table versions produced the
maximum number within the chosen confidence level.
The next series of versions of the VEP system were on line.
The first version of the on-line system allowed traders to pull
up information on their screens. Traders input details of trade,
and the machine calculated the exposure numbers based upon the
tables then in use. The resulting CEM amount was then added to
the customer’s existing credit exposure. During 1993, traders
could for purposes of discussions have used tables to calculate
the CEM amount or they could have gone on line. For actual
transactions, FNBC preferred that the traders and marketers use
the on-line system.
ii. Effect of the System
FNBC’s VEP system allowed traders and marketers to do
business without going to the credit department if a VEP credit
limit had been established for that customer and if the new swap
would not exceed that credit limit. It allowed FNBC to move away
from each swap’s being individually approved by the credit
department.
The VEP system permitted the establishment of VEPLs, under
which multiple VEP transactions with the same counterparty were
permitted as long as the VEPL was not exceeded. A VEPL was
required to be renewed at least annually. Once a VEPL was
approved, traders and marketers could conduct transactions with
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