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NR 2016-122
Contact: William Grassano
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OCC Reports Bank Trading Revenue Increased in the Second Quarter 2016

WASHINGTON — Trading revenue of U.S. commercial banks and savings associations rose to $6.9 billion in the second quarter of 2016 from $5.8 billion in the previous quarter, and $5.5 billion in the second quarter a year earlier, the Office of the Comptroller of the Currency (OCC) reported in its Quarterly Report on Bank Trading and Derivatives Activities.

The OCC report showed trading revenue in the second quarter of this year increased by 19.5 percent from the first quarter and by 25 percent from a year ago. The increase in second quarter trading revenue reflects an increase in combined interest rate and foreign exchange revenue.

The notional amount of derivatives held by insured U.S. commercial banks declined by $3.1 trillion, or 1.6 percent, during the second quarter falling to $189.8 trillion. The decrease is attributed to trade compression, a process that aggregates a large number of swap contracts with similar attributes like risk or cash flows into fewer trades.

The OCC also reported:

  • Trading risk exposure, as measured by value-at-risk, decreased in the second quarter of 2016.  
  • Credit exposure from derivatives increased in the second quarter of 2016. Net current credit exposure increased $45.7 billion, or 9.9 percent, to $505.7 billion.
  • Derivatives contracts remained concentrated in interest rate products, which represented 75.7 percent of total derivative notional amounts.
  • While four banks held 91 percent of the notional amount of derivatives, 1,442 U.S. commercial banks and savings associations held derivatives in the second quarter of 2016, 21 more banks and savings associations than the previous quarter.
  • The percentage of centrally cleared derivatives transactions rose to 39.1 percent in the second quarter of 2016, up from 36.5 percent in the first quarter. Clearing was most prevalent among interest rate derivative contracts.

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