Internal Control Questionnaires and Verification Procedures

Liquidity Risk

1. Have the board and management established funding/liquidity policies and procedures for derivatives that:

   1. Require the incorporation, if material, of derivatives and corresponding collateral, margining arrangements, and early termination agreements into liquidity-related management information systems and contingency plans?

   2. Detail circumstances in which the bank will honor noncontractual early termination requests?

   3. Describe when the bank will provide credit enhancements?

   4. Limit the amount of assets that can be encumbered by collateral and margining arrangements (such limits are generally determined after performing analyses to identify requirements under adverse scenarios)?

   5. Limit the amount of collateral tied to common triggers (e.g., credit rating)?

   6. Require annual board approval?

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