The Office of the Comptroller of the Currency (OCC) recently released its quarterly report on bank trading and derivatives activities for the second quarter of 2016.
The report said trading revenue of U.S. commercial banks and savings associations rose to a total of $6.9 billion over the second quarter, up from $5.8 billion over the previous quarter and $5.5 billion in the second quarter of 2015. Additionally, the report showed trading revenue in the second quarter of 2016 increased by 19.5 percent over the previous quarter and 25 percent from a year prior. OCC said the increase was due to plusses in combined interest rates and foreign exchange revenues.
OCC’s report said the notional amount of derivatives held by insured U.S. commercial banks declined by a total of $3.1 trillion during the examined quarter due to a process called compression, which aggregates a large number of swap contracts with similar attributes into fewer overall trades.
Key facts in the report include a decreased trading risk exposure, an increase of 9.9 percent in credit exposure from derivatives and a concentration of derivatives contracts in interest rate products.
The report said while four banks held 91 percent of the notional amount of derivatives, 1,442 commercial banks and savings associations in the United States held derivatives in the quarter, an increase of 21 banks from the previous quarter.