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Quarterly Derivatives Fact Sheet -- First Quarter 1997
Read Section: General.......Risk........High-risk
Mortgage Securities and Structured Notes....Revenue
General
The notional amount of derivatives in insured
commercial bank portfolios increased by $1.9 billion in the first quarter to
$21.89 trillion. During the first quarter of 1997, the notional amount of
interest rate contracts rose by $1.1 trillion, to $14.6 trillion. Foreign
exchange contracts increased by $678 billion, to $6.9 trillion (this figure
excludes spot foreign exchange contracts, which increased by $205 billion to
$468 billion). Commodity and equity contracts rose by $20 billion, to $387
billion. Data on credit derivatives was reported for the first time and totaled
$19 billion. The number of commercial banks holding derivatives increased by 21
in the first quarter to 504. Relative to year-end 1996, the total notional
amount of derivative contracts increased by more than nine percent. [See tables
1, 2, and
3
.]
Approximately 67 percent of the notional amount of derivative positions was
comprised of interest rate contracts with an additional 31 percent represented
by foreign exchange contracts. Commodity and equity contracts accounted for
only 2 percent of the total notional amount. The composition of contract types
remains relatively unchanged since 1991. [See Table
3
.]
Off-balance sheet derivatives continue to be
concentrated in the largest banks. Eight commercial banks account for 94
percent of the total notional amount of derivatives in the banking system, with
98 percent accounted for by the top 25 banks. [See
Table 3
.]
Over-the-counter (OTC) and
exchange-traded contracts comprised 86 percent and 14 percent,
respectively, of the notional holdings as of first quarter, which has remained
virtually the same since the first quarter of 1996. [See
Table 3
.] OTC contracts tend to be more popular with banks and bank customers because
they can be tailored to meet firm-specific risk management needs. However, OTC
contracts tend to be less liquid than exchange-traded contracts, which are
standardized and fungible.
The notional amounts of short-term (i.e., with remaining maturities of less
than one year) contracts declined $376 billion from the fourth quarter, of
1996, to $8.9 trillion. Contracts with remaining maturities of one to five
years decreased by $248 billion, to $3.9 trillion, and long-term (i.e., with
maturities of five or more years) contracts increased by $89 billion, to $1.4
trillion. [See tables 10,
11, and 12
.]
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