WASHINGTON - Federal Reserve Board Chairman Alan Greenspan said Friday in that the failure of Barings PLC has not created systemic problems for the world's financial system.

Mr. Greenspan, speaking at an Atlanta Fed-sponsored conference on financial markets in Coral Gables, Fla., said the market for Japanese stocks and bonds remains strong, despite Barings' failure.

Resilient and highly liquid markets, like Japan's, are crucial to mitigating any risks to the system that derivatives and other complex financial instruments can pose, he said. He added that markets must be able to absorb the failure of key players.

Mr. Greenspan also said firms need to maintain vigilant risk-management systems, using the latest technology to help them monitor their current financial exposure.

However, that technology also poses risks, as the Barings episode showed, he said.

"You couldn't write the execution slips fast enough (in the past) to lose as much money as was lost over the last few weeks by one individual buttressed by technology," he said.

Mr. Greenspan said most firms' risk management systems survived 1994's interest rate hikes with few problems.

"But the Barings episode suggests that further improvements to internal risk management systems are needed, in some instances very significant improvements," Mr. Greenspan said.

Mr. Greenspan said bankers should not rely completely on data analysis for risk management, and he said they must constantly revise their judgments on market liquidity.

Also, he urged the Group of 30 to address the legal foundation of book- entry transfer systems, and the design and operation of securities depositories.

"In these and other ways, we must assure that our rapidly changing global financial system retains the capacity to contain market shocks," he said. "This is a never-ending process which will require vigilance on the part of both the private market participants and public regulatory authorities."

Christopher Rhoads contributed to this report from Coral Gables, Fla.

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