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Quarterly Derivatives Fact Sheet - Third Quarter 1996
Choose Section: General.......Risk....Revenue........High-risk Mortgage Securities and Structured Notes
General
The notional amount of derivatives in commercial bank portfolios
increased by $782 billion in the third quarter to $19.8 trillion.
(This figure excludes spot foreign exchange contracts, which
increased by $6.6 billion to $567 billion). During the third
quarter, the notional amount of interest rate contracts rose by
$740 billion, to $13.3 trillion. Foreign exchange contracts
increased by $85 billion, to $6.2 trillion, while commodity and
equity contracts fell by $43 billion, to $351 billion. The
number of commercial banks holding derivatives decreased by 6 in
the third quarter to 501. [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 [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 (these figures
exclude spot foreign exchange). [See Table 3.]
Over-the-counter (OTC) and exchange-traded contracts comprised 87
percent and 13 percent, respectively, of the notional holdings as
of third quarter, which has remained virtually the same since 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 are down $621 billion
from the Second, quarter, to $8.7 trillion. Contracts with
remaining maturities of one to five years increased by $281
billion, to $4.4 trillion, and long-term (i.e., with maturities
of five or more years) contracts increased by $116 billion, to
$1.2 trillion. [See Tables 10, 11, and 12.]
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