In the past few months much focus has been put on understanding VAR and how 
it is calculated (through RisktRAC).  However, everyone should note that the 
credit department also receives our information.  Market risk and credit risk 
are inherently different, with different requirements.  This memo serves as a 
reminder of what some of the key differences are, how the credit system uses 
RisktRAC differently from market risk, how this affects us, what some key 
problems are in the credit system caused by our data, and changes to be made 
by risk management groups.

differences are between credit and market risk - you all know this, but many 
of your ba's don't. 
when a book is flat it still has an effect on credit.  Flat books must be 
officialized
market risk is keyed off positions and curves.  When we make money, market 
risk is reduced.  Credit risk is keyed off positions with customers.  When we 
make money, credit risk is increased, as people owe us more money.

how the credit system uses RisktRAC differently from market risk
Market risk picks up all officialized books.  If a book is not officialized 
it does not pick the book up.
Credit picks up all officalized books.  If a book is not officialized, it 
picks up the previous day's position.  Therefore, if positions in book A are 
moved to book B, and A is no longer officialized, credit picks up the 
previous day's position for book A.  As a result, if a book is no longer 
used, please officialize it the first day it is no longer used, so credit 
will pick up 0 on a go forward basis.
Market risk is not concerned with counterparty codes and names.
Credit needs correct counterparty codes and names.  In recent months, the 
counterparty information has deteriorated.  Enron official counterparty names 
need to be used so they flow properly to credit.

what are some key problems in the credit system caused by our data
As referenced above: correct counterparty names and books with 0 positions 
not being officialized so credit picks up previous day info.
As a takeaway from this message please ensure only correct counterparty names 
are used and that if a book has 0 positions that it is officialized the first 
day it has 0 positions.

If you have specific questions about credit, please call Debbie Brackett, at 
X35856.
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