Bank One Corporation - Page 45

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          the approved counterparty without additional approval from the              
          credit management area so long as the credit exposure for the               
          transaction did not exceed the VEPL at the time the transaction             
          was initiated.  This system enhanced the ability of FNBC to                 
          determine whether sufficient credit limits were available to do             
          new transactions.                                                           
               VEP transactions could also be approved deal by deal with              
          counterparties that had availability under existing Internal                
          Guidance Limits (IGLs) approving business with the customer.                
          FNBC’s IGL was an internal preapproved agreement on the amount of           
          credit capacity FNBC would make available to a customer and how             
          it was to be allocated among types of transactions, e.g., loans             
          or letters of credit.  The VEPL was an allocation of part of the            
          IGL to financial derivative transactions with a customer.                   
                              iii.  System’s Operation                                
               FNBC’s VEP system could calculate the credit exposure for              
          many types of financial derivatives, including interest rate                
          swaps, currency swaps, commodity swaps, FRAs, interest options,             
          currency options, and long-term foreign exchange.  The VEP system           
          generally employed a Monte Carlo simulation model using 10,000              
          potential variations of quarterly interest rates over the                   
          remaining term of each swap and produced a distribution of 10,000           
          amounts representing values/credit exposures at any future                  








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Last modified: May 25, 2011