Supervisory Information Framework for derivatives and trading activities

This paper enhances the supervisory information framework that was jointly published in May 1995 by the Basle Committee on Banking Supervision and the Technical Committee of the International Organization of Securities Commissions (IOSCO) to assess the derivatives activities of banks and securities firms. The 1995 framework has been widely implemented by banking and securities authorities for supervisory purposes, and has also served as a basis for collecting periodic data on worldwide derivatives markets.

The purpose of this revision is to keep pace with financial innovation and progress in risk management practices for trading and derivatives activities, particularly with regard to market risk. This initiative is part of the continuing effort by the Basle Committee and by IOSCO to monitor the trading and derivatives activities of banks and securities firms. In this regard, this revision builds upon earlier work of the two Committees, including the 1994 joint release of guidelines for improving risk management of derivatives activities and subsequent risk management guidance, and the 1995 joint recommendations for enhancing public disclosure in this important area that were presented in annual joint disclosure survey reports since that year. Moreover, since the initial release of the joint supervisory information framework for derivatives the Basle Committee amended its Capital Accord in 1996 to address market risk and in 1997 issued risk management guidance on interest rate risk that applies to banks. In addition, IOSCO has been exploring options for capturing market risk in the capital adequacy and risk management standards that apply to securities firms.