standards for bank trading in often turbulent financial markets. The directive from the federal banking supervisory office covers bank trading in securities, money, precious metals, foreign exchange, and all derivatives markets. The directive, which was finalized in late October and takes immediate effect, stipulates high levels of management responsibility and optimal internal organization structures and addresses pay guidelines in sensitive bank areas. Under the new rules, a bank's management must ensure that traders possess comprehensive knowledge of the products they deal in and of the trading methods and risk-control procedures. Senior management must stay on top of the banks' daily trading and act to prevent mishaps by setting and enforcing limits for different risks. Pay for traders should not be linked closely to the bank's trading performance as this might encourage excessive risk-taking, the directive said.
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