Derivatives concentrated in largest US banks, says OCC

Seven banks in the US account for almost 96% of the total notional amount of derivatives in the commercial banking system, the Office of the Comptroller (OCC) of the Currency has said in a report.

The OCC, which administers US national banks, said in its latest quarterly derivatives report that derivatives continue to be concentrated in the largest banks, namely JP Morgan Chase, Bank of America, Citibank, Wachovia Bank, Banc One, HSBC and Wells Fargo.

JP Morgan Chase, with $30.7 trillion of derivatives exposure by notional amount, is by far the biggest dealer in the business, according to the OCC’s figures. The bank has total assets of $622 billion. Its next rival, Bank of America, has $13 trillion of total derivatives exposure, with total assets of $574 billion. This is followed by Citibank, which has $10.1 trillion of derivatives exposure and total assets of $515 billion.

The data is based on call report information provided by US commercial banks. The OCC said that in the first quarter, the notional amount of interest rate contracts increased by $5.1 trillion to $53.4 trillion. Foreign exchange contracts, excluding spot deals, increased by $167 billion to $6.2 trillion, while equity, commodity and other derivatives contracts increased by $7 billion to $1 trillion. Credit derivatives increased by $75 billion to $710 billion. The OCC added that the number of commercial banks holding derivatives increased by 61 to 488.

The OCC also found that end-user hedging is on the increase, with the notional amount of derivatives activity increasing by $294 billion to $2.4 trillion. “This increase is largely attributable to increased levels of hedging of mortgage servicing rights during the first quarter and other balance sheet re-positioning,” said the OCC.