Magazine article American Banker

Banks Start Baring Swaps Holdings

Magazine article American Banker

Banks Start Baring Swaps Holdings

Article excerpt

Amid mounting concerns from regulators and lawmakers, banks are beginning to volunatrily disclose details about their derivatives trading activity.

Chemical Bank revealed in its new annual report that derivatives accounted for about 40% of its $1.1 billion in total trading revenue last year. And other banks are expected to make similar disclosures.

"There's pressure on the banks to get out in front of the regulators," said Judah Kraushaar, a banking analyst at Merrill Lynch. "Clearly this is a trend that is going to broaden and deepen."

Banking regulators have begun focusing intently on the industry's burgeoning use of such derivatives as interest rate swaps, currency swaps, and foreign exchange forward contracts. According to the Office of the Comptroller, 626 banks had positions in derivatives as of Sept. 30, 1993.

Focus of Regulator

The Comptroller's office is preparing to zero in on derivatives during examinations of banks. And some members of Congress, including the powerful Rep. John D. Dingell, have voiced support for legislation to curb the risks of derivatives.

The Financial Accounting Standards Board expects to have a rule for greater disclosure in place by the end of the year.

"Many in the industry think it would be better to do voluntary disclosures before requirements came out," said Peter J. Tobin, executive vice president and chief financial officer of chemical.

He said the real impetus for Chemical's move was a report on derivatives by the so-called Group of 30, which represents the largest industrial nations. …

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