Study showing derivatives profits at banks criticized as one-sided.

A recent statistical report that appeared to show banks are scoring big profits in the derivatives market is being questioned because it failed to include trades on which banks did not make money.

John Logan, executive vice president of investments at First American National Bank in Nashville has taken Veribanc Inc. and its director of research, Warren G. Heller, to task for relying too heavily on federal call. report data.

The report, which was the subject of a page one article in the Sept. 30 American Banker, indicated that the replacement cost of bank derivative holdings has increased faster than the notional value, which would be an indication that banks are usually "in the money" on their trades.

Mr. Logan said, however, that call reports show a distorted picture. "Banks report only the contracts on which they have a net gain," he said. Bank has $36 billion in replacement costs, that means its customers have that much in losses."

An official at the Federal Deposit Insurance Corp. confirmed that banks are required to provide only data on in-the-money transactions. These transactions carry greater credit risk and possible replacement costs than contracts that are out of the money.

In March, the FDIC will require that banks report both in-the-money and out-of-the-money transactions separately. While Veribanc's Mr. Heller agreed that call report information was incomplete, he said it's better than nothing.

However, Mr. Heller disagreed with Mr. Logan that a bank's profits equals its customers' loss.

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