The following news release was issued today. This first fact sheet reports call report data from the fourth quarter, 1994. The call report data show that the notional amounts of derivatives in commercial bank portfolios did not change from the third quarter.
Notional amounts are helpful in measuring the level of derivatives activity.
However, these amounts do not measure risk. Risk, measured by credit exposure on derivatives contracts, is generally reported to be about 1 to 2 percent of the notional amounts. Credit exposures from derivatives for the six national banks among the top ten in derivatives activity averages 170 percent of capital. Call report figures on credit exposure on derivatives may be overstated because they do not take into account bilateral netting among derivatives parties. Bilateral netting reflects the extent to which the amount a bank owes a counterparty in a derivatives transaction may be used to offset the amount that counterparty owes the bank.