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Quarterly Derivatives Fact Sheet -- Third Quarter 1997
Read Section: General.......Risk.......Revenue.......High-risk Mortgage Securities and Structured Notes
GENERAL
The notional amount of derivatives in insured commercial bank
portfolios increased by $1.7 trillion in the third quarter to
$25.0 trillion. Relative to the second quarter of 1997, the total
notional amount of derivative contracts increased by more than
seven percent. During the third quarter of 1997, the notional
amount of interest rate contracts rose by $1.5 trillion, to $17.3
trillion. Foreign exchange contracts increased by $184 billion,
to $7.3 trillion (this figure excludes spot foreign exchange
contracts, which increased by $144 billion to $651 billion).
Commodity and equity contracts rose by $39 billion, to $452
billion. Credit derivatives rose by $13 billion, and now total
$39 billion. The number of commercial banks holding derivatives
increased by 11 in the third quarter to 475. [See Tables 1, 2.]
Approximately 69 percent of the notional amount of derivative
positions was comprised of interest rate contracts with an
additional 29 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 99 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 third quarter, which has remained virtually the same since the
third 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 rose by $600 million
from the second quarter of 1997, to $10.8 trillion. Contracts
with remaining maturities of one to five years increased by $500
billion, to $5.7 billion, and long-term (i.e., with maturities of
five or more years) contracts increased by $200 billion, to $1.9
trillion. [See Tables 10, 11 and 12.]
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