I might mention that the new policy will apply to all investment and end-user derivatives activities. It illustrates that supervisors are increasingly emphasizing risk management on a portfolio rather than an instrument-specific basis. Although this is arguably the first principle of finance and is widely appreciated by bankers and regulators, putting this principle into practice in banking has not been easy.
Past banking crises have, in part, reflected a failure to recognize or to prudently limit concentrations of risk. However, technology and financial innovation are now enabling financial theories and conceptual techniques that have been around for decades to be put into practice to manage market, credit and liquidity risks.