Update: title should read “88% of unregulated CDS risk is concentrated in 5 banks according to the Treasury”

The sexier headline could read:

If you are going to crash in a plane due to mechanical failure, 88% of the crashes occur with the top 5 airlines and we don’t require that they ever check the planes to ensure their safety. BTW – the tax payers pay for any damages caused & they also reimburse those 5 airlines for any losses due to crashes they are negligent for.

In December the Treasury Department started to publicly release the “Quarterly Report on Bank Trading and Derivatives. This new report, made available by the Office of the Comptroller of Currency, provides information on the federal government’s supervision of banks as well as the investment activities of financial institutions.”

The most recent report states “[t]he notional value of derivatives held by U.S. commercial banks increased $804 billion in the third quarter, or 0.4%, to $204.3 trillion.”

The “[f]ive large commercial banks represent 97% of the total banking industry notional amounts and 88% of industry net current credit exposure.” The exposure is explained that “[c]redit risk in derivatives differs from credit risk in loans due to the more uncertain nature of the potential credit exposure.” And, “[C]redit default swaps represent the dominant product at 98% of all credit derivatives notionals.” By Law, there is no regulation governing this ~$204T market.

Press Release entitled TREASURY ANNOUNCES OPEN GOVERNMENT PLAN
New Information Sharing Effort Promotes Culture of Transparency, Collaboration, Participation
From the Comptroller of the Currency, Administrator of National Banks are the OCC’s Quarterly Report on Bank Derivatives Activities reports.
Info above is from the 3rd Quarter 2009 Report [PDF]