BCBS 14

Definition

BCBS 14 is a document published by the Basel Committee on Banking Supervision on December 1994 in the Risk Management category.

Title

Prudential supervision of banks' derivatives activities.

Abstract

Introduction

The report considers risks arising from derivative activities, defined as financial contracts whose value depends on a reference rate or the value of an underlying asset or index. Their prime purpose is to transfer risks associated with fluctuations in factors such as interest rates, exchange rates, and the prices of equities and commodities more efficiently. Derivatives comprise, inter alia, futures and forwards, swaps, options and instruments with similar characteristics. Derivatives are a sub-set of off-balance-sheet contingencies and commitments. The traditional off-balance-sheet items not treated as derivatives in this document include credit substitutes, such as acceptances, guarantees, letters of credit, forward asset purchases and general commitments to lend (including standby facilities and credit lines). The credit risk arising from both classes of off-balance-sheet items were addressed in the 1988 Capital Accord.

8. This report is structured as follows:

• the first section describes the past work of the Basle Committee which has had an effect on banks' derivative activities;
• the second section records a number of different projects currently in train, all of which address more or less directly the risk of derivatives activities;
• the third section addresses issues relating to banks' management and control of derivatives risk;
• the fourth section briefly reviews concerns about payments and settlement issues;
• the fifth section briefly discusses reporting, accounting and disclosure issues.

Document Profile

• Publication Date: December 1994
• Publication Type: Other
• Publication Status: Superseded
• Publication Category: Risk Management
• Number of Pages: 14
• Keywords: Market Risk

See Also

• BIS Website: Web Page
• PDF File: Download

Disclaimers

For definitive information on regulatory matters always consult primary sources, especially where it concerns legally binding rules and regulations.

The above regulatory document abstract is quoted verbatim in this Open Risk Manual entry and provided free of charge for the convenience of all internet users. There is no explicit or implicit endorsement of this web service by the Bank of International Settlements. The copyright of the included material rests with the original authors (Links to the original texts are duly provided).