Circular
1998 Trading And Capital-Markets Activities Manual
March 20, 1998
Circular No. 11037

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

The following is from a statement by the Board of Governors of the Federal Reserve System:

The Federal Reserve Board has issued its 1998 Trading and Capital-Markets Activities Manual for examiners and banking organizations.

The new manual represents a substantive revision and expansion of the Trading Activities Manual issued in March 1994.

The new manual compiles the latest Federal Reserve supervisory guidance on trading operations and related capital-markets banking activities. It details both sound management practices and key examination and review considerations for these operations and activities.

The manual provides in-depth discussions of a wide range of risk management issues encountered in trading and dealer operations, including revised and expanded presentations on market risk, counterparty credit risk, legal risk, financial reporting, accounting and ethics.

Chapters on capital adequacy and settlement risk and a comprehensive subject index have also been added. A new section of the manual presents existing guidance on other capital-markets related activities, including whole-bank interest rate risk management, investment and end-user activities, and secondary market credit activities and products such as securitization and credit derivatives.

The manual also includes profiles of 35 specific financial instruments commonly encountered in trading and capital-markets related activities. Each profile contains a basic description of the instrument and discussions on topics such as the risks encountered, pricing conventions, accounting treatment, risk-based capital considerations and bank-eligibility requirements.

Copies of the manual may be obtained for $50 from:
Publications Services
Division of Support Services
Board of Governors of the Federal Reserve System
Washington, D.C. 20551

Updates and supplements will be issued as needed in the spring and fall of each year. The price will be $20 annually.

The manual was produced by staff members at the Board of Governors and at the Federal Reserve Banks of New York, Chicago, Minneapolis and San Francisco.

Copies of the manual are available from the Board, as indicated in the above statement.