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Quarterly Derivatives Fact Sheet -- Fourth Quarter 1997
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GENERAL
The notional amount of derivatives in insured commercial bank portfolios increased by $35
billion (less than one percent) in the fourth quarter, to $25.1 trillion. During the fourth quarter,
the notional amount of interest rate contracts fell by $185 billion, to $17.1 trillion. Foreign
exchange contracts increased by $162 billion, to $7.4 trillion. This figure excludes spot foreign
exchange contracts, which decreased by $334 billion to $317 billion. Commodity and equity
contracts rose by $42 billion, to $494 billion. Credit derivatives rose by $16 billion, and now
total $55 billion. The number of commercial banks holding derivatives decreased by 16, to 459.
[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 1994.
[See Table 3.]
Holdings of off-balance sheet derivatives continue to be concentrated in the largest banks. Eight
commercial banks account for 95 percent of the total notional amount of derivatives in the
banking system, with 99 percent held by the top 25 banks. [See Tables 3, 5.]
Over-the-counter (OTC) and exchange-traded contracts comprised 88 percent and 12 percent,
respectively, of the notional holdings as of fourth quarter of 1997, which has remained virtually
the same since the fourth 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 contracts (i.e., with remaining maturities of less than one
year) fell by $75 billion from the third quarter of 1997, to $10.7 trillion. Contracts with
remaining maturities of one to five years increased by $110 billion, to $5.8 trillion, and long-term (i.e., with maturities of five or more years) contracts increased by $314 billion, to $2.2
trillion. [See Tables 10, 11
and 12.]
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