Big banks that trade derivatives are getting better at telling about it in their annual reports, a Federal Reserve study says.
According the study published in September's Federal Reserve Bulletin, eight of the top 10 U.S. derivatives banks disclosed in 1994 annual reports their daily value at risk from derivatives trading.
None of the top 10 did so in 1993.
Value at risk is the maximum amount by which an institution's portfolio could decline in market value over a set period of time.
Six of the 10 banks reported their amount of nonperforming derivatives contracts in 1994, up from one in 1993. Five split up their trading income by risk exposure or line of business, up from two in 1993.
Nonetheless, wrote the study's authors, Gerald A. Edwards Jr. and Gregory E. Eller of the Fed's division of banking supervision and regulation, "the accounting treatment of derivatives is now a hodgepodge of mark-to-market accounting and accrual accounting and depends on the type of contract and the purpose for which the party entered into the contract."