The Securities and Exchange Commission adopted rules Tuesday that require financial institutions to disclose more information about their derivatives portfolios.
The rules focus almost exclusively on market risk, the effect interest rate changes have on a portfolio.
In addition to disclosing information about the types of derivativesheld, institutions must describe how changes in the market would affect their portfolios' value.
"The rules we adopt today will help investors to better understand the way a company is using derivative instruments," SEC Chairman Arthur Levitt said in a prepared statement. "The rules will give investors tangible, quantifiable information about these instruments and their potential consequences for a company's financial position."
The SEC also is requiring institutions to explain how they manage market risk, and they must describe in a footnote to the financial statement the accounting method used for derivatives.
The rules are effective July 15 for banks, thrifts, and securities firms with at least $2.5 billion of capital. All other financial institutions have an extra year to comply.