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OCC: Bank trading revenue in Q4'15 down 4.3% YOY

Insured U.S. commercial banks and savings associations reported$4.3 billion in trading revenue in the fourth quarter of 2015, 19.6% lower thanthe previous quarter and4.3% lower than a year earlier, according to the OCC's quarterly report on banktrading and derivatives activities.

The agency noted in a March 30 news release that the declinein the fourth quarter reflects a strong seasonal trend in trading revenue.

Trading risk exposure, as measured by average value-at-risk,decreased in the fourth quarter of 2015. Average VaR across the top five dealerbanking companies declined 7.8% to $329 million, according to the OCC's quarterlyreport.

Net current credit exposure, the primary metric used by the OCCto evaluate credit risk in bank derivatives activities, decreased 11.2% to $395.0billion in the fourth quarter of 2015. Receivables from interest rate contractsdecreased $345 billion to $2.1 trillion during the period.

The notional amount of derivatives held by insured U.S. commercialbanks decreased 5.8% to $181.0 trillion during the fourth quarter of 2015, the lowestlevel since the first quarter of 2008. The decline results from industry effortsto eliminate offsetting trades, an activity known as trade compression, rather thana significant reduction in the volume of trading activity, the OCC said.

Credit derivatives, which represented 3.9% of total derivativesnotionals, declined 14.8% from the previous quarter to $7.0 trillion. Derivativecontracts remained concentrated in interest rate products, which represented 76.5%of total derivative notional amounts.

The percentage of centrally cleared derivatives transactionsdecreased slightly to 37% in the fourth quarter of 2015, from 38% in the previousquarter.  Clearing has developed most in interestrate derivatives, where 46% were cleared.

A total of 1,410 insured U.S. commercial banks and savings associationsreported derivatives activities at the end of the fourth quarter of 2015, five fewerthan the previous quarter. During the fourth quarter of 2015, the four largest banksrepresented 90.8% of the total banking industry notional amounts and 83.2% of industrynet current credit exposure.