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Quarterly Derivatives Fact Sheet
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General
The notional amount of derivatives in commercial bank portfolios decreased by $778 billion in the fourth quarter to $16.86 trillion. (This figure excludes spot foreign exchange contracts, which decreased by $299 billion to $305 billion as of December 31, 1995.) Although notional amounts
have increased steadily over the last few years, this quarter's slight decline is consistent with a
pattern of stabilizing or declining notional amounts that have been present in previous fourth
quarter numbers.
During the fourth quarter, the notional amount of interest rate contracts fell by
$234 billion, to $11.10 trillion. Foreign exchange contracts fell by $555 billion, to $5.39 trillion,
while commodity and equity contracts grew by $12 billion, to $378 billion. The number of
commercial banks holding derivatives decreased by 37 in the fourth quarter to 558. [See Tables 1,
2, and 3.]
Off-balance sheet derivatives are concentrated in the largest banks. Nine commercial banks
account for 94 percent of the total notional amount of derivatives in the banking system, with 9 percent accounted for by the top 25 banks (these figures include spot foreign exchange). For the years
1991 through 1994, the concentration of derivatives in the top nine banks was 86 percent, 91 percent, 91 percent,
and 92 percent respectively. [See Table 3 for concentrations excluding spot foreign
exchange.]
Approximately 66 percent of the notional amount of derivative positions were comprised of interest
rate contracts with an additional 32 percent represented by foreign exchange contracts. Commodity
and equity contracts were only 2 percent of the total notional amount. The composition of contract
types remains relatively unchanged since 1991. [See Table 3.]
Over-the-counter (OTC) and exchange-traded contracts comprised 86 percent and 14 percent, respectively,
of the notional holdings as of fourth quarter, which is virtually the same as third quarter. OTC
contracts tend to be more popular with banks and bank customers due to the flexibility in
tailoring them to meet risk management needs. However, OTC contracts tend to be less liquid
than exchange-traded contracts, which are standardized and fungible. [See Table 3.]
The notional values of short-term contracts (i.e., with remaining maturities of less than one year)
are down $829 billion, or 9.1 percent from third quarter, to $8.27 trillion. Medium-term contracts (i.e.,
remaining maturities of one to five years) increased by $53 billion, or 1.5 percent, to $3.59 trillion, and
long-term contracts (i.e., maturities of five or more years) increased by $62 billion, or 7.6 percent, to
$876 billion. [See Tables 10, 11, and 12.]
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