Bank One Corporation - Page 59

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          significant stress on the use of netting agreements.  The OCC               
          also encouraged the use of netting agreements.  As part of the              
          credit approval function, the OCC expected credit officers to               
          assess the availability and impact of credit exposure reduction             
          techniques such as netting.                                                 
               Pursuant to BC-277:                                                    
               In order to reduce counterparty credit exposure, a                     
               national bank should use master close-out netting                      
               agreements with its counterparties to the broadest                     
               extent legally enforceable, including in any possible                  
               insolvency proceedings of such counterparties.  * * *                  
                         *    *    *    *    *    *    *                              
               The advantages of such netting arrangements include a                  
               reduction in credit and liquidity exposures, the                       
               potential to do more business with existing                            
               counterparties within existing credit lines, and a                     
               reduced need for collateral to support counterparty                    
               obligations.  * * *                                                    
                    3.  Status of Netting Arrangements                                
               Before 1990, prior law arguably allowed a U.S. bankruptcy              
          trustee or liquidator either to accept or to repudiate individual           
          contracts among a portfolio of financial derivatives, depending             
          on their profitability to the bankrupt party.  The trustee or               
          liquidator could arguably enforce only those swaps that had                 
          positive value.                                                             
               In 1990, Congress amended then 11 U.S.C. section 362(b)(14)            
          (now section 362(b)(17) (2000)) and added to the Bankruptcy Code            
          11 U.S.C. section 560 to limit a bankruptcy trustee’s avoidance             
          powers.  These sections exempted swap agreements from the                   





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