Capital Briefs: Trading Banks' Derivatives Exposure Rose in 2Q

Credit exposure from derivatives increased 6% to $235 billion at the largest trading banks during the second quarter, the Office of the Comptroller of the Currency reported Friday.

The OCC said that on June 30, the nine largest trading banks' exposure from derivatives stood at 244% of risk-based capital. That exposure was up from 233.7% during the first quarter and 111% on June 30, 1995.

Credit exposure is the amount owed to the bank by its derivatives counterparties. The agency attributed the increase in risk to the large growth in derivatives trading volume.

Nonperforming derivatives contracts remained low, the agency reported. The value of contracts 30 days or more past due totaled $16 million.

The notional amount of bank derivatives activity rose $1.2 trillion to $19 trillion, and trading revenue declined to $1.9 billion. That's $62 million less than the record $2 billion banks earned from derivatives during the first quarter.

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