OCC report says bank trading revenue down in Q3

The Office of the Comptroller of the Currency’s (OCC) third quarter 2021 trading revenue report indicated that trading activity was $1.3 billion less than that of the second quarter.

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The Quarterly Report on Bank Trading and Derivatives Activities said trading revenue of domestic commercial banks and savings associations was $6.8 billion in the third quarter — a 15.5 percent decline from the second quarter.

According to the OCC, the report showed four large banks possessed 89.3 percent of the total banking industry notional amount of derivatives; a total of 1,357 insured domestic national and state commercial banks and savings associations held derivatives at the end of third quarter 2021; derivative contracts were concentrated in interest rate products representing 71.4 percent of total derivative notional amounts; and the percentage of centrally cleared derivatives transactions declined quarter-over-quarter to 39.0 percent in third quarter 2021.

The OCC and other supervisors have dedicated examiners at the largest banks to continuously evaluate the credit, market, operational, reputation, and compliance risks of bank trading and derivatives activities.

Additionally, the OCC works with other financial supervisors and major market participants to address infrastructure, clearing and margining issues in over-the-counter (OTC) derivatives. Also, OCC actions include developing objectives and milestones for stronger trade processing and improved market transparency across
derivative categories and requirements for posting and collecting margin.