The risk that U.S. banks face from trading in derivatives climbed in the second quarter for the first time since 2008 after Europe's debt crisis triggered a drop in interest rates that increased the amount lenders are owed on swap contracts.
The money that banks including JPMorgan Chase & Co. and Citigroup Inc. would be owed if all derivative contracts were liquidated rose 11% in the three months that ended June 30, to $397 billion, the Office of the Comptroller of the Currency said in the report. The so-called net current credit exposure is the primary metric used to track credit risk in banks' derivatives businesses.
The increase would have been larger if not for a rise in the amount of trades that are offset by netting agreements, which rose to a record 91.9% from 91%, the OCC said.