On average, the size of bank trading operations relative to bank capital is small. As I mentioned earlier, very few institutions formally segregate their proprietary trading operations. A bank's aggregate trading limit generally reflects a bank's overall appetite for risk. It forms an upper bound for aggregate exposure. However, low loss experiences and on-site examinations findings by our resident examiners at all the major national bank dealers indicate that such aggregate trading limits are rarely exceeded.
Historical data indicate that trading revenues have been less volatile than is generally perceived.
One bank accounted for four of those instances of losses. And, even in the quarters in which losses were reported, the size of the losses were minimal compared to the quarterly revenue of the bank. The possibility that a large number of financial institutions would simultaneously experience declines in revenue certainly has systemic implications. It also raises the specter that any one bank which has other dealer banks as significant counterparties could face a sudden and significant broad-based decline in counterparty credit quality. They use a number of complimentary methods to accomplish this.