Greenspan urges `stress test'

IT WOULD be a "major mistake" to regulate financial derivatives more heavily in the wake of the Asian financial crisis, Alan Greenspan, the chairman of the US Federal Reserve Board, said yesterday.

But he urged banks to take more care in weighing up their own risks by "stress testing" their assessments against the possibility of a financial panic. Mr Greenspan noted that neither the crisis nor the dramatic collapse of Long-Term Capital Management, a speculative investment fund, had dented the growth in derivatives. US commercial banks reported a notional $33bn of contracts outstanding at the year-end, a rise of over 30 per cent.