BOCA RATION, Fla. -- Chemical Banking Corp. chairman Walter V. Shipley said the banking industry should hasten its supervision of derivatives to avoid governmentall regulations.
Mr. Shipley said derivatives have become a political issue and he is concerned the industry "is not moving fast enough to supervise itself."
Speaking here at the annual convention of the Bankers' Association for Foreign Trade, Mr. Shipley said banks should focus on education to communicate that derivatives are "extremely valuable tools."
And, he said, attempts to supervise derivatives more closely must be done in an international contextt since they involved global markets.
"We need to move to greater disclosure to make sure that customers understand the risks inherent in some of the complex and exotic products today."
Chemical is both a major deliver in over-the-counter derivatives globally and one of the largest bank end-users of the risk management instruments.
"We need to be diligent in not knowing selling something that is very complex and with risks that a less sophisticated buyer would not understand. Sell them what they need but make sure they understand the risks," he said.
"I think there are a lot [fewer] sophisticated buyers of derivatives products out there than we probably realize in the business."
He said a project is underway in the industry to draw up a series of standards of disclosure "that would provide leadership in helping the industry with consistency of standards and policies."
