The Top 5 Banks That Dominate Derivatives

source: (see below w/ table)
The Businessweek article I previous linked to (Goldman Says Rule Curbing Counterparty Links Risks Jobs) had interesting info on the too-big-to-fail banks' derivatives exposure as of 12/31/2011 (Q1 2012 not available yet):

"As of December, five firms accounted for 96 percent of the total U.S. banking industry’s notional holdings in derivatives and 86 percent of the industry’s net current credit exposure in derivatives, according to the Office of the Comptroller of the Currency."

I looked into this further and found the OCC's Q4 2011 report on bank trading and derivatives activities. Here's more from the summary.

  • The notional amount of derivatives held by insured U.S. commercial banks fell $17 trillion, or 7%, from the third quarter of 2011, to $231 trillion. The fourth quarter decline in notionals followed a 0.6% decline during the third quarter, and marks the first time notionals have declined in consecutive quarters. Notional derivatives at year-end were 0.2% lower than at the end of 2010, the first year-over-year decline on record.
  • Derivative contracts remain concentrated in interest rate products, which comprise 81% of total derivative notional amounts. Credit derivatives, which represent 6% of total derivatives notionals, fell 6% to $14.8 trillion.

Here are the top 5 banks that dominate derivatives as of December 31, 2011 (total notional amounts):

  1. JPMorgan Chase, $70.151 trillion
  2. Citibank, $52.102 trillion
  3. Bank of America, $50.135 trillion
  4. Goldman Sachs, $44.192 trillion
  5. HSBC Bank USA, $4.321 trillion

And the top 5 banks that dominate OTC credit derivatives as of December 31, 2011 (total notional amounts):

  1. JPMorgan Chase, $5.775 trillion
  2. Bank of America, $4.720 trillion
  3. Citibank, $2.975 trillion
  4. HSBC Bank, $657.234 billion
  5. Goldman Sachs, $499.741 billion


The amount of gross credit exposure eliminated through bilateral netting was at 92.2% in Q2 2011.

This is the most interesting chart to me because it shows the trend of "total derivative notionals" held at insured U.S. commercial banks since 1996. The "total notionals" and "dealer (trading)" charts peaked out in Q2 2011 at $249.3 trillion and 229.8 trillion, respectively. Will the total notional value of derivatives at the TBTF banks continue to unwind?

Find more charts in the Q4 2011 report. OCC's Q1 2012 should be out soon. Also, look at this infographic at Derivatives: The Unregulated Global Casino for Banks.
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