Federal Financial Institutions Examination Council	Press Release
For Immediate Release	October 3, 1997

Today, federal depository institution regulatory agencies published for industry comment, proposed revisions to their supervisory guidelines for investment securities and end-user derivatives activities. The regulators, acting jointly through the Federal Financial Institutions Examination Council (FFIEC), are seeking comment on a set of sound practices that focus on the risk management of investment activities, with a particular emphasis on market risk (primarily interest rate risk).

The agencies also are seeking comment on their intent to rescind the Supervisory Policy Statement on Securities Activities published on February 3, 1992. This would eliminate the constraints on investing in mortgage derivative products (MDPs) that are deemed "high risk" under existing supervisory guidance. The decision to eliminate such constraints does not indicate that the regulatory agencies believe that MDPs currently identified as "high risk" are appropriate or inappropriate investments. Rather, the decision reflects the view that the appropriateness of any investment product must be evaluated using a variety of factors, especially management's ability to measure and manage the risks of investment activities. The proposed policy statement reflects the risk-based approach to supervision adopted by the financial institution supervisors, as well as the intent to encourage financial institutions to evaluate and control the risks associated with investment activities more on an investment portfolio or institution-wide basis.