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.
These figures represent a slight decline from third quarter. The decline in positive fair values corresponds to the reduction in credit risk mentioned above, while the decline in negative fair values means that banks owe their counterparties less. Note that while gross fair value data are very useful in depicting more meaningful market risk data, users must be cautioned that these figures do not include the results of cash positions in the trading portfolio. Similarly, the data are reported on a legal entity basis and consequently do not reflect effects of positions in portfolios of affiliates, and may result in double counting bank and non-bank affiliate positions. The Call Report data include revenue information regarding cash and derivative trading activities.