(D)
89
WEDNESDAY, OCTOBER 26, 1994
WITH
THE
RECOMMENDATIONS OF THE
BASLE
IN LINE COMMITTEE ON BANKING SUPERVISION WHICH THE MONETARY AUTHORITY HAS ADOPTED, THE EXISTING CAPITAL ADEQUACY REGIME FOR AUTHORISED INSTITUTIONS INCLUDES AN ALLOWANCE FOR SECURITIES AND DERIVATIVE BUSINESS. WHILE IT IS PRINCIPALLY THE CREDIT RISK ARISING FROM SUCH ACTIVITIES THAT IS COVERED, THE BASLE COMMITTEE IS CURRENTLY CONSIDERING PROPOSALS TO INTRODUCE EXPLICIT CAPITAL REQUIREMENTS FOR THE MARKET RISK 1 N RESPECT OF SECURITIES AND DERIVATIVE TRADING. THE MONETARY AUTHORITY IS KEEPING CLOSELY IN TOUCH WITH DEVELOPMENTS IN BASLE AND IS LIKELY TO BRING FORWARD PROPOSALS FOR CAPITAL REQUIREMENTS IN RELATION ΤΟ MARKET RISK DURING THE COURSE OF 1995.
THE BASLE COMMITTEE HAS, AT THE SAME TIME, MADE IT CLEAR THAT ADHERENCE TO CAPITAL STANDARDS IS NOT SUFFICIENT то ENSURE THE SAFE OPERATION OF BANKS INVOLVED IN DERIVATIVE TRADING. IT IS PERHAPS OF GREATER IMPORTANCE THAT BANKS SHOULD HAVE SOUND RISK MANAGEMENT AND CONTROL SYSTEMS. THE COMMITTEE HAS THEREFORE RECENTLY ISSUED TO SUPERVISORS WORLD-WIDE GUIDELINES ON 'THE SOUND RISK MANAGEMENT OF DERIVATIVES. SIMILAR GUIDELINES HAVE ALSO BEEN ISSUED TO SECURITIES REGULATORS BY THE INTERNATIONAL ORGANISATION OF SECURITIES COMMISSIONS. THE MONETARY AUTHORITY HAS CONSULTED THE INDUSTRY ASSOCIATIONS AND INTENDS TO TURN THE BASLE GUIDELINES INTO A FORMAL GUIDELINE OF ITS OWN IN THE NEAR FUTURE. IT FURTHER PROPOSES TO ISSUE TO AUTHORISED INSTITUTIONS MORE DETAILED GUIDANCE ON DERIVATIVE ACTIVITIES AND ALSO TO CONDUCT A MARKET SURVEY ON THE SUBJECT.
AND
THERE ARE REGULAR CONTACTS BETWEEN THE SECURITIES FUTURES COMMISSION AND THE MONETARY AUTHORITY REGARDING THE REGULATION OF INSTITUTIONS WHICH FALL WITHIN THEIR RESPECTIVE AREAS OF RESPONSIBILITY. AD HOC MEETINGS ARE ALSO HELD AS AND WHEN NECESSARY ΤΟ DISCUSS SPECIFIC PROBLEMS IN RESPECT OF PARTICULAR INSTITUTIONS. THE TWO REGULATORS HAVE AGREED THAT THEY NEED TO CO-ORDINATE THEIR REGULATION IN RESPECT OF AUTHORISED INSTITUTIONS INVOLVED IN SECURITIES BUSINESS. A WORKING PARTY HAS BEEN FORMED WITH THE OBJECTIVE OF MAPPING OUT A MEMORANDUM OF UNDERSTANDING COVERING THE MECHANICS OF CO-OPERATION BETWEEN THE TWO BODIES. THE MEMORANDUM WILL SET OUT THE RESPECTIVE ROLES OF THE TWO REGULATORS IN OVERSEEING THE OPERATIONS OF EXEMPT DEALERS.
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