WASHINGTON -- Financial regulators joined forces Thursday to convince Congress that they can prevent the fast-growing derivatives market from blowing up into another financial crisis.

"We are trying to clamp down on risk taking," Comptroller of the Currency Eugene A. Ludwig assured lawmakers at a House Banking Committee hearing. "In contrast to deregulation, we are adding regulation."

Congress is concerned that no one regulatory agency is responsible for the derivatives market. With oversight fractured among several agencies, it is hard to quantify the market.

Hard Numbers

But the Comptroller's office filled that breach somewhat on Thursday when it provided hard numbers on the banking industry's participation in the derivatives market.

All told, there are 615 banks that use derivatives. Only 10 banks deal in derivatives, but these institutions control 90% of the market, according to Call Report data culled by the OCC.

Of these top 10, Chemcial is the leader. Its derivatives business had a notional value of $2.1 trillion at June 30, the OCC said.

In addition to the OCC, the other agencies testifying were: the Federal Reserve, Securities and Exchange Commission, Commodity Futures Trading Commission, Office of Thrift Supervision, and Federal Deposit Insurance Corp.

Guidelines Published

The OCC published 26 pages of guidelines on derivatives Wednesday that explain what bankers should be doing to manage the derivatives' various risks, including credit, interest rate, liquidity, and market risks.

The guidelines also require banks selling derivatives to other banks to make sure the buyer needs what it is getting.

"This does add an additional layer of protection so we don't have end users getting into products they shouldn't," Mr. Ludwig said.

But that's not all. Mr. Ludwig pledged on Thursday: "We will be doing more."

Enhanced Monitoring

Banks using derivatives can expect increased capital standards, more disclosures, and standardized accounting rules. Another possibility: Top executives at banks losing money on derivatives could be ousted by regulators.

The market is "constantly changing, and we're changing with it," Mr. Ludwig said.

None of the regulators wanted Congress to pass new laws restricting derivatives. "I don't believe that we need at this time added legislative power," Mr. Ludwig said.

While no committee member threatened legislation, clearly some lawmakers think the derivatives market is a disaster waiting to happen.

"This is simply another Wall Street-developed house of cards," Rep. Joseph P. Kennedy 2d, D-Mass., claimed at a House Banking Committee hearing. "Shouldn't we have learned something from paying out half a trillion dollars?" to clean up the thrift industry.

Committee Chairman Henry B. Gonzalez agreed.

"You can call it whatever you want, but in my book it's gambling, and gambling involves risk," the Texas Democrat said, adding that insured banks should not be gambling.

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