WASHINGTON -- Defending the record of their agencies and the industry, financial regulators urged lawmakers Wednesday to delay consideration of derivatives-related legislation.

The agencies' current authority - as well as their extensive flew monitoring programs - is adequate to ensure proper oversight of derivatives markets, said five top bank, securities, and futures regulators.

What is more, extensive self-monitoring by banks and other firms further obviates the need for any near-term action by Congress, they said.

Federal Reserve Chairman Alan Greenspan even told Congress new laws could backfire. They could limit the self-regulation by private firms that has already taken hold, he said, and drive activity overseas, beyond the grasp of U.S. regulators.

Heightened Risk Seen

Derivatives legislation "could actually increase risks in the U.S. financial system by creating a regulatory regime that is itself ineffective and that diminishes the effectiveness of market discipline," he said.

The officials testified Wednesday at the latest congressional hearing to consider the risks of derivatives and the quality of existing oversight. Several lawmakers have already introduced bills to tighten supervision.

Others - including Rep. Edward J. Markey, D-Mass., who called the hearing - have threatened to propose additional legislation.

And while key lawmakers have admitted that no bill is likely to pass Congress this year, regulators and industry officials remain fearful of the prospect of future legislation.

Consideration of the risks posed by burgeoning markets for derivatives, as well as the ability of regulators to oversee them, has grown into a near frenzy in Washington in recent months.

Media accounts, industry reports, and statements by policymakers have fueled concerns that the failure of a major derivatives user could spiral into a systemwide financial crisis.

Many also worry that if banks delve too deeply into these markets, taxpayers could be forced to bail them out.

Financial regulators and private-sector players have tried to appease these fears, arguing that derivatives are a natural development of risk management and help improve the efficiency of the financial system. At the same time, they have issued veiled warnings, not wanting to appear cavalier about their risks.

In recent weeks, both banking regulators and banks themselves have been praised by some as models of careful oversight and risk management. And at Wednesday's hearing, their activities were pointed to as examples of how other regulators, broker-dealers, and insurance companies should proceed.

Rep. Markey went so far as to praise banking regulators for "acting quite responsibly" in their oversight.

Wednesday's hearing focused on the recent report by the General Accounting Office that criticized current oversight of derivatives, and called on Congress to implement a host of new laws to limit their risk to the financial system.

Praise for GAO Effort

Financial regulators praised the breadth and quality of the GAO effort. And they agreed with several of its recommendations - like the need for greater disclosure, new accounting rules, strong internal controls, and international cooperation.

The agencies have already implemented a range of programs that address some of the issues the report identified.

They also agreed with the GAO's recommendation that capital guidelines be revamped to account for market risk. Bank regulators said they will soon release such a proposal, one that is likely to rely heavily on banks' own risk-assessment models.

But financial regulators also rebuffed many of the GAO's suggestions, especially those involving new laws.

"I am satisfied at this point that the industry has acted responsibly," said Arthur Levitt, chairman of the Securities and Exchange Commission. "I am not prepared to call for a specific piece of legislation."

But he warned that if cooperation from the industry wanes or other impediments to oversight emerge, he could return to Congress to urge its members to implement reforms.

Rep. John D. Dingell, D-Mich., has asked the Treasury Department, the SEC, and

an industry group to prepare formal responses to the GAO report, including a detailed analysis of each of its recommendations.

Mr. Greenspan told Congress that many types of derivatives are "far less risky than certain types of loans that are made." And he pointed to the the performance of banks' risk managment systems during the recent market turmoil as evidence of banks' careful self-monitoring.

"While the banks suffered losses trading in some markets, their risk controls worked," he said.

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