WASHINGTON -- New York Federal Reserve Bank President William McDonough said top executives at both corporations and financial institutions should take an active role if their firms are involved in derivatives markets.

"I do understand that people of my generation who are not astrophysicists have to strain to understand these products," Mr. McDonough said.

"But it is simply not responsible to use that difficulty as an excuse for noninvolvement."

Group of 30 Report

McDonough delivered his remarks at a seminar here focusing on a recently published Group of 30 report on the exotic financial instruments.

"If the bosses do not or cannot understand both the risks and rewards of their products, their firm should not be in the business," Mr. McDonough said.

He advised both executives and board members to monitor the use of the instruments on a regular basis.

Regulation Under Study

"Senior management must be actively engaged in the risk-management process on an ongoing basis and not just at the policy formation stage," he said.

The complex products have captured the attention of both lawmakers and regulators, who are studying whether the burgeoning markets need to be regulated more closely.

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