Remember those time bombs called derivatives which threatened to economically blow up the world in 2008? Not only were they never really regulated, they are back with a vengeance. A new report, by the Comptroller of the Currency, on Bank Trading and Derivatives Activities, Q2 2011, shows derivatives have increased 11.6% from one year ago to a U.S. holdings of $249 trillion dollars.

Five large commercial banks represent 96% of the total banking industry notional amounts and 86% of industry net current credit exposure.

According to DealBook, those banks are, pretty much the same banks who were given massive bail outs via TARP. BoA especially is already in trouble due to their Countrywide holdings. 99% of all derivatives are held by just 25 banks.

The nation’s four biggest banks — JPMorgan Chase, Citigroup, Bank of America and Goldman Sachs — are the biggest players, holding roughly 95 percent of the industry’s total exposure to derivatives. JPMorgan, which holds the most among commercial banks, carries some $78 trillion worth of derivatives on its books, according to the report. Citi is next on the list, with $56 trillion, up from $54 trillion in the first quarter.

Seeking Alpha has a good explanation of how the actual loss risks are much less than the frightening $249 trillion dollar amount.

According to Reuters, the OCC data is the only information disclosed to date on commodities types of derivatives:

The OCC, an arm of the U.S. Treasury that supervises all national banks, provides detailed trading revenues for the top five commercial banks in the United States. Its report is the only public gauge of the earnings of commodity trading operations among the big bank holding firms, which don't otherwise report a detailed breakdown by type of asset.

Still, what the OCC breaks down for commodities is considered imperfect due to the inclusion of revenue from other categories such as credit or housing-related securities.

The SEC is also seeking comment on mutual funds getting into the derivatives game, yet supposedly are split on any sort of, watered down Volcker Rule.

Now, we have the inevitable Greek default and an analysis by Paul Krugman showing strong deflation needs to happen in order avoid a disaster in Europe.

The market seems to expect price stability for Germany — an inflation rate of 1 percent or so over the next 5 years. And that has a clear message: it’s signaling catastrophe for the euro.

Why? I tried to lay this out a while ago. A reasonable estimate would be that Spain and other peripherals need to reduce their price levels relative to Germany by around 20 percent. If Germany had 4 percent inflation, they could do that over 5 years with stable prices in the periphery — which would imply an overall eurozone inflation rate of something like 3 percent.

But if Germany is going to have only 1 percent inflation, we’re talking about massive deflation in the periphery, which is both hard (probably impossible) as a macroeconomic proposition, and would greatly magnify the debt burden. This is a recipe for failure, and collapse.

Yet any sort of regulation of derivatives was pushed off until 2012.

A top federal regulator will further delay a flood of new rules for the $600 trillion derivatives market, another setback for the sweeping overhaul passed in the aftermath of the financial crisis.

Gary Gensler, chairman of the Commodity Futures Trading Commission, announced on Thursday plans to wrap up the agency’s rule-writing in the first few months of 2012.

Previously we showed U.S. Banks are 4th in exposure to a Greece default. The EU is already talking about derivatives taking a hair cut, instead of taxpayers.

European Union regulators may write down the value of outstanding derivatives contracts issued by banks in crisis as part of broader plans to protect taxpayers from having to bail out failing lenders

So, as we can see, derivatives have increased, are even more concentrated in a few banks, while Europe is on the precipice and only the same people who foresaw the last crisis are sounding the alarm.