WASHINGTON - Banks' off-balance-sheet derivatives holdings have leveled off at about $15 trillion over the past three quarters, the Comptroller's office plans to announce today.
The agency's data suggests that the vast majority of bank derivatives activity is conducted at dealer banks, rather than at banks that are end- users of the complex financial products.
Six commercial banks account for 83% of the industry's derivatives activity and the 25 banks most active in the derivatives market account for 97%.
Banks' derivatives use "has leveled off," said Douglas E. Harris, senior deputy comptroller for capital markets. He also noted that "the number of banks overall that have derivatives in their portfolios has dropped."
At the end of the fourth quarter, 633 banks held derivatives, down from 678 at the end of the third quarter.
Derivatives are financial contracts whose returns are derived from the performance of such things as currencies, interest rates, or commodities.
The agency plans to announce figures on commercial banks' derivatives activity each quarter, starting with today's announcement of fourth-quarter data.
The report includes data on off-balance-sheet derivatives such as futures, forwards, swaps and options, but does not include banks' on- balance-sheet derivatives holdings of structured notes and mortgage securities. Structured notes have proved particularly popular with small banks.
The Comptroller's office report "gives no information as to the profitability of these transactions," said Mr. Harris, who noted that future derivatives holdings reports - beginning with information from the quarter ending today - would be more detailed.
Banks held derivative contracts with an underlying - or notional - amount of $15.6 trillion at the end of the year. That's unchanged from the third quarter and up $1.7 trillion from the first quarter of 1994.
The Comptroller's office continues to urge banks to use derivatives to hedge other risks they take. "We certainly do continue to encourage banks to properly use derivatives for risk management purposes," Mr. Harris said.
For the nation's six heaviest bank users of derivatives, credit exposures from the instruments average 170% of capital. By comparison, the average credit exposures from home loans for all banks is 153%, according to the agency.