The RBA’s main supervision task this year has been extending the capital adequacy rules to cover the market risks in banks’ trading books -- that is, the risks from fluctuations in interest rates, exchange rates, equity prices and commodity prices. The new guidelines become effective at the beginning of 1998.
The novel feature of the market risk guidelines, which were developed by the Basle Committee on Banking Supervision and are being adopted internationally, is the reliance they allow to be placed on banks’ own risk management systems.