A group of leading commercial and investment banks on Monday unveiled voluntary guidelines designed to better control the risk of working with highly leveraged counterparties, including hedge funds.

The Counterparty Risk Management Policy Group argued that improving internal controls-not additional regulations-will limit exposure to trading risks taken on by counterparties and creditors.

But the guidelines fall far short of recommendations made by the President's Working Group on Financial Markets in April. That report- delivered by the Treasury Department, Federal Reserve Board, Securities and Exchange Commission, and Commodity Futures Trading Commission-said hedge funds should disclose public information about their trading activities to give better information to market participants, creditors, and counterparties.

But the industry group argued that "qualitative" and "consolidated" descriptions of exposures should be reported only to regulators and only if requested.

The industry group focused more on internal information: getting better data on counterparties' capital, risk profile, and liquidity situation.

"The essence of risk management is not complex," said E. Gerald Corrigan, a managing director at Goldman, Sachs & Co. and a co-chairman of the industry group.

"It really reduces to a very simple proposition: getting the right information to the right people at the right time, so the right decisions will be made."

"As a creditor, you would be better able to come close to having the full picture," said co-chairman Stephen G. Thieke, a managing director at J.P. Morgan & Co. "We contemplate a much higher level of information sharing (than) prevailed in the market last year.

"That can be done through private channels and not public disclosure."

The group represents 12 companies, including Chase Manhattan Corp., Citigroup Inc., and Merrill Lynch & Co. It was formed in the aftermath of the industry-funded bailout of Long-Term Capital Management, a highly leveraged hedge fund that nearly collapsed last September.

Though there are public policy interests in controlling market risk-the Federal Reserve Bank of New York helped organize Long-Term Capital's $3.6 billion bailout, for example-the report concluded that the job should be left to industry players.

"There are powerful, strong commercial interests" to controlling risk internally, Mr. Thieke said.

Mr. Corrigan and Mr. Thieke plan to share the report in testimony Thursday at a hearing by Rep. Richard H. Baker's capital markets subcommittee of the House Banking Committee.

Creditors' failure to recognize the magnitude of Long-Term Capital's market exposure occurred because management was not continually reassessing how its risk profile was changing, Mr. Corrigan said.

"The gaps were more in the analysis, but not in the reporting to senior management," Mr. Thieke said.

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