FINANCIAL institutions and securities firms trading derivatives yesterday began talks on establishing minimum standards for operational and risk management controls.
The Hong Kong Monetary Authority (HKMA), the territory's central bank, and the Securities and Futures Commission (SFC), the securities watchdog, issued copies of international guidelines on the management of risk in derivative activities.
The industry talks follow the joint statement and guidelines issued last week by the Basle Committee of banking supervision, an international regulator on banking, and the International Organisation of Securities Commissions (IOSCO), the global securities regulator.
''The Basle paper, and a similar paper issued by the IOSCO, represent a global, co-ordinated initiative by banking and securities supervisors to promote better risk management of financial derivative activities,'' said Albert Cheok, executive director (banking supervision) of the HKMA.
Market players are required to submit comments on the guidelines by September 15. Following the consultations, the two regulatory bodies will issue formal guidelines for Hong Kong.
''The monetary authority will consider how, and to what extent, the Basle paper should form the basis for formal guidelines for authorised institutions on the risk management of their financial derivative business,'' a spokesman said.
For securities houses, the SFC intends to issue final guidelines which will set a minimum best practice for over-the-counter derivatives dealers.
