BIS warning on futures and options

Click to follow
The Independent Online
(First Edition)

THE Bank for International Settlements yesterday stepped up a campaign to make banks take more care about their involvement in financial derivatives such as futures and options. Alexandre Lamfalussy, general manager of the BIS, the body that co-ordinates international banking regulation, said banks must become more sensitive to the risks arising from the huge growth of derivative products.

This had made bank balance sheets harder to read and made it difficult to see what was happening when shocks hit the financial system.

He said: 'The phenomenal growth of derivatives and associated trading techniques has reduced the transparency of market participants' balance sheets and has obscured the transmission of disturbances across market segments and institutions.'

Mr Lamfalussy was speaking to bankers at the annual meeting of the International Monetary Conference in Stockholm. The speech followed a set of new BIS requirements for banks that would raise the capital they set aside against risks in derivatives trading.

Mr Lamfalussy called for 'a major cooperative effort between market participants and the authorities.'

Comments