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News Release 2017-1 | January 4, 2017

OCC Reports Bank Trading Revenue Fell in the Third Quarter 2016

WASHINGTON—Trading revenue of U.S. commercial banks and savings associations fell to $6.4 billion in the third quarter of 2016 from $7 billion in the previous quarter, 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 third quarter of 2016 decreased nearly 9 percent. The drop in third quarter trading revenue reflects a decline in combined interest rate and foreign exchange revenue. However, compared with the third quarter of 2015, trading revenue increased by $1.1 billion or nearly 20 percent. Trading results for the second and third quarter of 2016 were the second highest ever reported for each respective quarter since 2000.

The OCC reported:

  • Trading risk exposure, as measured by value-at-risk, decreased in the third quarter of 2016.
  • Credit exposure from derivatives decreased in the third quarter of 2016. Net current credit exposure decreased $24 billion, or 4.7 percent, for the previous quarter to $481.7 billion.
  • Derivatives contracts remained concentrated in interest rate products, which represented 75 percent of total derivative notional amounts.
  • While four banks held nearly 90 percent of the notional amount of derivatives, 1,438 U.S. commercial banks and savings associations held derivatives in the third quarter of 2016.
  • The percentage of centrally cleared derivatives transactions was 39 percent of all derivatives transacted in the third quarter of 2016, down slightly from 39.1 percent in the second quarter. Central clearing was most prevalent among interest rate derivative contracts.

The notional amount of derivatives held by insured U.S. commercial banks declined by $12.4 trillion to $177.5 trillion, or nearly 6.5 percent, during the third quarter. 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.

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