NR 97-86
September 22, 1997

            Derivatives Volume Continues To Increase
                  But Trading Revenue Declines

WASHINGTON, D.C. -- The notional amount of derivatives activity at commercial
banks increased by $1.4 trillion in the second quarter to $23.3 trillion, the Office of the
Comptroller of the Currency (OCC) reported today in its quarterly report of derivatives
activity.  For the first half of the year, the notional amount of derivatives activity
increased by 16 percent.

Banks reported $2 billion in revenue in the second quarter from cash instruments and
off-balance sheet derivatives -- 18 percent lower than the record $2.4 billion reported in
the first quarter.  The top eight banks accounted for 79 percent of second quarter trading
revenues.  Over the past four quarters, commercial banks have earned $7.9 billion in
trading revenue from these activities.  For the eight commercial banks with the most
derivatives trading activity, revenue from this source totaled 6 percent of total revenue in
the second quarter.

The drop of $421 million in total trading revenue during the second quarter can be
attributed to a decline of revenue from interest rate positions from $1.35 billion to $939
million and from commodity and equity positions from $343 million to $116 million. 
Partially offsetting these declines was a $218 million increase in revenue from foreign
exchange positions.

The notional amounts of interest rate derivatives grew during the second quarter by $1.2
trillion to $15.8 trillion, and foreign exchange derivative contracts grew by $165 billion
to $7.1 trillion.  Other derivatives grew by $33 billion to $439 billion.

For all banks, the book value of contracts past due 30 days or more aggregated only $15
million, or .005 percent of total credit exposure from derivatives contracts.   This low
delinquency figure reflects the current healthy economic environment and the generally
high credit quality of counterparties and end-users with whom banks presently engage in
derivatives transactions, as well as the increased use of collateral.

This quarter, banks reported information on credit derivatives for the second time. 
These relatively new instruments, which have their value linked to the credit status of an
underlying loan or security, are used to help banks and other financial firms manage
their credit exposure.   The notional amount of credit derivatives rose to $25.6 billion, 34
percent more that the $19.1 billion reported the first quarter.  One bank, Morgan
Guaranty, accounts for three-fourths of the second quarter total.

The number of commercial banks holding derivatives decreased by 40 in the second
quarter to 463.  The bulk of this decline is due to consolidation in the banking system.
Until the last quarter, when there was an increase of 21 banks engaged in derivatives
activities, the number of commercial banks holding derivatives had decreased for five
consecutive quarters.  

Relative to capital, total credit exposures for the top eight banks increased during the
quarter from 242 percent to 244 percent.  The dollar amount of total credit exposure
from off-balance sheet contracts for all banks was $283 billion, up $14 billion from the
first quarter.  This increase is largely due to an increase in the volume of derivatives
contracts during the second quarter.  Credit exposure would have been significantly
higher without the benefit of bilateral netting agreements.

A copy of the OCC Second Quarter 1997 Derivatives Data Fact Sheet and the
accompanying 12 tables and 13 graphs may be obtained by writing to Comptroller of the
Currency, Public Reference Room (Mail Stop 1-5), Washington, DC 20219; calling the
OCC information Fax Line at (202) 479-0141 and request document number 79786 from
the news releases; faxing a request to (202) 874-4448; ordering by phone (202) 874-5043; or visiting the OCC's Public Reference Room at 250 E Street, S.W. in
Washington, D.C. (9 a.m. - noon and 1 - 3 p.m., Monday-Friday).  The document will be
available on the OCC's web page at http://www.occ.treas.gov.

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The OCC charters, regulates and supervises approximately 2,800 national banks and 66 federal branches and
agencies of foreign banks in the U.S., accounting for more than half the nation's banking assets.  Its mission is to
ensure a safe, sound and competitive national banking system that supports the citizens, communities and
economy of the United States.