Exhibit 2-1

The exhibit illustrates how several models may be integrated to enable the FDIC to manage its risks. The risk model concept includes four major components:

  1. A credit risk model, in which bank failure probabilities, loss rates, and a correlation structure are fed through a simulation engine to calculate a distribution of possible credit losses.


  2. Investment information, including maturities, coupons, and whether available for sale


  3. Some formula or model for estimating insured deposit growth, and


  4. Estimates of premium income based on different policy assumptions.
These four components would be run through an analysis engine - potentially by simulation - to generate two outputs:
  1. Probability of losses exceeding a critical threshold, and


  2. Probability of the insurance fund falling below a target reserve ratio.