Bank One Corporation - Page 47

                                        -133-                                         
                    2.  Credit Risk Ratings                                           
                         a.  System of Risk Classification                            
               Like most banks, FNBC had during the relevant years a                  
          well-established system of evaluating and classifying credit                
          risks.  FNBC used this system for all transactions including                
          loans, swaps, and any of its other products.  FNBC’s credit                 
          officers established a customer’s risk class rating on the basis            
          of FNBC’s evaluations of the creditworthiness of the customer and           
          the industry in which the customer did business.  FNBC re-rated             
          its customers at least annually.  FNBC’s credit officers were               
          independent of the business units responsible for originating               
          transactions.                                                               
               FNBC’s credit risk classification system used numbers from 1           
          to 9.  Risk class 1 was the best credit quality and carried with            
          it minimal risk.  Risk class 9 was the worst credit rating and              
          was considered to be a loss.  Risk classes 1 through 3 were                 
          considered investment grade,49 counterparties in risk class 4               
          were generally considered to be acceptable bank quality assets              
          which required greater management attention, and counterparties             
          in risk class 5 were considered undesirable.  FNBC did not enter            


          49 The finance department performed the credit adjustment                   
          calculation on spreadsheets.  The CEM amounts and credit ratings            
          shown on the spreadsheets were derived from information provided            
          by the credit department.  If the risk class rating was not                 
          provided by the credit department, the finance department would             
          use a risk class 3 rating.  The finance department did not always           
          use the most current risk factors.                                          




Page:  Previous  123  124  125  126  127  128  129  130  131  132  133  134  135  136  137  138  139  140  141  142  Next

Last modified: May 25, 2011