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Please note: This item is from our archives and was published in 2008. It is provided for historical reference. The content may be out of date and links may no longer function.

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Insured U.S. commercial banks lost $9.97 billion trading cash and derivative instruments in the fourth quarter of 2007, according to the Office of the Comptroller of the Currency. This was a sharp reversal from $2.3 billion in revenues in the third quarter. Commercial banks also lost $11.8 billion in credit trading in the fourth quarter, a further deterioration from $2.7 billion in losses in the third quarter.

The report noted the heavy concentration of derivative contracts in a small number of institutions. The largest five dealers hold 97% of the total notional amount of derivatives, while the largest 25 banks hold nearly 100%. The report said 98% of all credit derivatives are in the form of credit default swaps.

The OCC’s Quarterly Report on Bank Trading and Derivatives Activities: Fourth Quarter 2007 is available at www.occ.gov/ftp/release/2008-36a.pdf .