WASHINGTON — The Office of the Comptroller of the Currency said Friday that starting in June it will collect more information on derivatives at all banks whose assets exceed $10 billion.
Agency officials said they are seeking information about the banks' counterparties and the amount and nature of their collateral for derivatives trades so they can get a better gauge of the banks' credit risk.
"Because we've been doing this for years, we've pushed for a number of years to get that credit information," said Kathryn Dick, the deputy comptroller for credit and market risk.
Many banks already provide much of the information in the footnotes of their financial statements or in other disclosures, but the data set will soon be more complete, Dick said. Banks will have to specify the types of counterparties they are engaged with, such as hedge funds, dealers or sovereign wealth funds.
The requirements apply to all commercial banks, not only those regulated by the OCC.
They were not related to a Federal Deposit Insurance Corp. rule issued Dec. 16 that required all banks and thrifts with a Camels rating of 3 and assets over $10 billion to reveal more information about their derivatives trades.
National banks lost $9.2 billion in trading in the fourth quarter, mostly because of changes in the fair value of previously established credit positions, Dick said. The OCC has begun calling them "legacy credit positions," the terminology the Treasury Department adopted to describe securities and assets that banks will sell to public-private investment funds as part of the Obama administration's program to remove toxic assets from banks' books.
The OCC said the main measurement of credit risk, the net current credit exposure, grew 84% in the fourth quarter, to $800 billion.
The agency's derivatives trading report for the fourth quarter described unique credit conditions: credit spreads for banks' counterparties widened while the banks' own spreads tightened, causing losses on positions that under normal credit conditions would have cancelled each other out.
Dick said the government's actions to recapitalize banks had caused the banks' credit spreads to tighten, while a general worsening in corporate credit had caused counterparties' spreads to widen. The failure of Lehman Brothers also aggravated conditions in the market.
The results for the first quarter of 2009 will likely be stronger than last quarter's, because first quarters generally involve more trading, Dick said. Credit spreads continued to widen at the start of this quarter, but "core trading revenue is recently strong," she said.
The markets could remain turbulent, however, Dick said.
"We could see a lot of volatility quarter to quarter, depending on what happens to these credit spreads, because it will require a fair-value adjustment that runs through the revenue banks are reporting," she said. "This will continue as long as we have illiquidity in some markets."
In the fourth quarter the notional amount of derivatives banks held increased by $25 trillion, to $200 trillion, as a result of transitions into the commercial banking system by the two largest investment banks, Goldman Sachs and Morgan Stanley, which became bank holding companies.
Interest rate contracts increased as well, to $164 billion, while credit derivatives fell 2%, to $16 trillion.