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John Walsh, the acting Comptroller of the Currency, told attendees they shouldn't expect surprises from the OCC's exam process. Martin Gruenberg, acting chairman of the FDIC, added that big banks should face the same market forces as smaller institutions, including the threat of failure.
March 13 -
The sovereign debt crisis affects all of us, whether we're managing risk at a trillion-dollar bank in North America or at Main Street Bank in Small Town, USA. Even if we don't have customers overseas, our customers at home may be affected either directly or indirectly by events on the other side of the Atlantic.
February 23
Trading revenues at commercial banks fell sharply in the fourth quarter as concerns about sovereign debt and economic uncertainty in Europe kept many banks and their clients on the sidelines.
In its quarterly report on bank trading and derivatives activities, the Office of the Comptroller of the Currency said Tuesday said that banks generated $2.5 billion of trading revenues in the fourth quarter, 70% lower than in the prior quarter and a 27% drop from the fourth quarter in 2010.
Martin Pfinsgraff, the OCC's deputy comptroller for credit and market risk, said in a press release that the fourth quarter is typically a weak one for trading revenues and the results were made worse in last year's fourth quarter "by a noticeable reduction of risk appetite by both banks and their clients. Against a backdrop of concerns about sovereign debt and the health of European banks, demand for risk intermediation products fell."
For the full year, however, insured commercial banks reported a record $25.8 billion in trading revenues, an increase of 14% over the previous record set in 2009, the OCC said.
"Trading revenues have been quite strong in each of the past three years, as banks have continued to recover from the financial crisis," Pfinsgraff said. "Trading activities can be an important component of a diversified revenue stream, and have been so during this recovery period for large and midsize banks."
Banks' credit exposure from derivatives fell 15% from the prior quarter, to $430 billion, as receivables from interest-rate, foreign-exchange, commodity, credit and equity contracts all declined, the OCC said.
The agency also noted that the notional amount of derivatives contracts fell 7% in the three-month period, to $231 trillion. The $17 trillion drop was the largest single-quarter drop on record, the OCC said, and marked the first time that notionals had declined in two consecutive quarters.
"The decline in notionals reflects the counterparty credit concerns that were fairly widespread over the latter part of the year," Pfinsgraff said.
