The extent of the benefit can be seen by comparing the gross positive replacement cost from Table 6 to the bilaterally-netted current exposures shown on Table 4. Non-performing contracts remained at nominal levels. These figures reflect both the current healthy economic environment and the relatively high credit quality of counterparties and end-users with whom banks currently engage in derivatives transactions. The Call Report data reflect the significant differences in customer bases and business strategies among the banks. The preponderance of trading activities, including both customer transactions and proprietary positions, is confined to the very largest banks.
Smaller banks tend to limit their use of derivatives to risk management transactions.
The banks with the 25 largest derivatives portfolios hold 93.6 percent of the contracts for trading purposes, primarily customer service transactions, while the remaining 6.4 percent are held for their own risk management needs. The trading contracts of these banks represent 91.5 percent of all notional values in the commercial banking system. Banks below the top 25, which use derivatives primarily for risk management transactions, hold 72.7 percent of their contracts for purposes other than trading. These figures represent a slight increase from first quarter levels. Note that while gross fair value data are very useful in depicting more meaningful market risk exposure, users must be cautioned that these figures do not include the results of cash positions in trading portfolios.