New York State said Monday it would train and hire more hedge fund specialists for its bank-examination force, and urged state regulated banks to pay more attention to hedge fund operations.

The department is looking to hire 35 examiners in the capital markets area and 34 examiners in the internal controls area, to bolster its present staff of 361 examiners.

"Banks need to strengthen their risk management practices and examiners need to improve their understanding of the risks posed by complex market activities," Acting Superintendent of Banks Elizabeth McCaul wrote in a report to the industry.

Examiners need to be more proactive in identifying potential trouble spots and learn more about the types of financial instruments banks are using, the report said.

Banks should implement "more robust" methods of obtaining financial information from potential hedge fund partners, improve their stress testing practices, and establish credit policies that are specifically geared to hedge funds.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.