Publications: Quarterly Derivatives Fact Sheet -- Second 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 $1.4 trillion in the second quarter to
$23.3 trillion. During the second quarter of 1997, the notional
amount of interest rate contracts rose by $1.2 trillion, to $15.8
trillion. Foreign exchange contracts increased by $165 billion,
to $7.1 trillion (this figure excludes spot foreign exchange
contracts, which increased by $39 billion to $507 billion).
Commodity and equity contracts rose by $26 billion, to $413
billion. Credit derivatives rose by $7 billion, totaling $26
billion. The number of commercial banks holding derivatives
decreased by 39 in the second quarter to 463. Relative to the
first quarter of 1997, the total notional amount of derivative
contracts increased by more than six percent. [See tables 1, 2, and 3.]
Approximately 68 percent of the notional amount of derivative
positions was comprised of interest rate contracts with an
additional 30 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 87
percent and 13 percent, respectively, of the notional holdings as
of second quarter, which has remained virtually the same since
the second 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 $1.2 trillion
from the first quarter of 1997, to $10.2 trillion. Contracts
with remaining maturities of one to five years increased by $1.3
trillion, to $5.2 trillion, and long-term (i.e., with maturities
of five or more years) contracts increased by $287 billion, to
$1.7 trillion. [See tables
10, 11, and 12.]
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