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Friday, Feb 22, 2002

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Guidelines for bankers

In any form of human activity, wherever there is scope for speculation, greed creeps in. The stock and forex markets are no exception. And wherever there is greediness, the impulse to gamble is a natural crollary. With the introduction of online trading in stocks and derivatives, wherein all one has to do is to press a few keys to convey his/her speculative desire, the responsibility of the monitoring authorities has become enormous. In this regard, the article `An Irish brew and a wake-up call' (Business Line, February 18) highlights the risks involved in options and derivatives trading, and cautions banks and the regulators on the need for speedy corrective action to check any recurrence of the Nick Leeson and John Rusnick type episodes.

Taking the Ketan Parekh episode as a cue, it is advisable that the Reserve Bank of India issues strict guidelines to bankers not to allow trades without visible, comprehensible and recoverable financial back-ups.

S. Madhavan

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