The 19-page report by the Basle Committee on Banking Supervision puts the burden on institutions to tighten internal controls on the complex investments.
But it also urges regulators to step up efforts to follow developments in the securities, whose returns are based on, or derived from, those from other investments.
The report came as lawmakers and regulators in the US and other countries move to increase government oversight of the little understood, highly technical market after large losses.
The committee, including senior representatives of bank supervisors and central banks in the United States, Canada, Japan and Europe, urges dealers and investors in derivatives, to follow basic principles that include:
Supervision by boards of directors and senior management;
Continuous monitoring of risk and frequent management reports;
Comprehensive internal controls and audit procedures.
Release of the report to guide banks worldwide was co-ordinated with similar recommendations by the International Organisation of Securities Commissions.
Derivatives 'have the potential to enhance the safety and soundness of financial institutions and to produce a more efficient allocation of financial risks', the Basle committee said.
But since derivatives also repackage the risks 'in combinations that can be quite complex, they can also threaten the safety and soundness of institutions if they aren't clearly understood and properly managed'.
The growing complexity, diversity and volume of derivatives products, aided by rapid advances in technology and communications, posed increasing challenges to managing these risks.