WASHINGTON -- Federal banking regulators are increasing their surveillance of banks' derivatives activities to ensure that they do not pose undue risks, but must avoid taking action that stifles the benefits that such products provide, Alan Greenspan, chairman of the Federal Reserve Board, said yesterday.

"We need to ensure that banks have proper safeguards in place and that they not expose themselves to undue risks," Greenspan told the American Bankers Association's annual convention in San Diego. "However it is also important that, in our efforts to contain risk-taking, we do not unduly stifle innovation or unnecessarily reduce the competitiveness of U.S. banks."

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