The number of banks holding derivatives declined by nine in the first quarter to 549 banks. Derivatives continue to be concentrated in the largest banks. Revenues from trading activities, which include off-balance sheet derivatives and cash instruments, rose 26 percent from the previous quarter. The top nine banks' credit exposure from derivatives declined from 250 percent to 234 percent of risk based capital. The decline in credit exposure from derivatives is mostly a result of increased use by banks of bilateral netting to reduce exposure.
Banks continue to maintain relative balance in their exposure to market risk.
This risk is measured by positive and negative fair values of derivatives portfolios. Relatively balanced bank books mean that the value of positions where the bank could have a gain do not significantly differ from the positions where the bank could have a loss. Structured notes and high-risk mortgage securities showed depreciation in value in the aggregate during the first quarter stemming mostly from an increase in interest rates during the quarter. Structured notes were held by 4,041 banks in the first quarter, a decline of 233 from the previous quarter. Its mission is to ensure the safety and soundness of the national banking system.