Internal Control Questionnaires and Verification Procedures

Offsetting Resale and Repurchase Transactions

1. Has the board of directors, consistent with its duties and responsibilities, adopted written offsetting repurchase transaction policies that:

   1. Limit the aggregate amount of repurchase transactions?

   2. Limit the amounts in unmatched or extended (over 30 days) maturity transactions?

   3. Determine maximum time gaps for unmatched maturity transactions?

   4. Determine minimally acceptable interest rate spreads for various maturity transactions?

   5. Determine the maximum amount of funds to be extended to any single or related firms through “reverse repo” transactions, involving unsold (through forward sales) securities?

   6. Require firms involved in “reverse repo” transactions to submit corporate resolutions stating the names and limits of individuals, who are authorized to commit the firm?

   7. Require submission of current financial information by firms involved in “reverse repo” transactions?

   8. Provide for periodic credit reviews and approvals for firms involved in “reverse repo” transactions?

   9. Specify types of acceptable repurchase transaction collateral (if so, indicate type ).

2. Are written collateral control procedures designed so that:

   1. Collateral assignment forms are used?

   2. Collateral assignments of registered securities are accompanied by powers of attorney signed by the registered owner?

      • Registered securities are registered in bank or bank’s nominee name when they are assigned as collateral for extended maturity (over 30 days) “reverse repo” transactions.

   3. Funds are not disbursed until “reverse repo” collateral is delivered into the physical custody of the bank or an independent safekeeping agent?

   4. Funds are only advanced against predetermined collateral margins or discounts?

      • If so, indicate margin or discount percentage .

   5. Collateral margins or discounts are predicted upon:

      • The type of security pledged as collateral?

      • Maturity of collateral?

      • Historic and anticipated price volatility of the collateral?

      • Maturity of the “reverse repo” agreements?

   6. Maintenance agreements are required to support pre- determined collateral margin or discount?

   7. Maintenance agreements are structured to allow margin calls in the event of collateral price declines?

   8. Collateral market value is frequently checked to determine compliance with margin and maintenance requirements (if so, indicate frequency of checks ).

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