A statement of principles on standards to be followed when derivatives business is conducted in Guernsey has been widely distributed to financial institutions within the Island.

The principles have been drawn up by a working party of Financial Services Commission staff and representatives from different segments of the finance sector.

Peter Crook, Superintendent of Banks, says: 'Derivatives business in Guernsey is not substantial but there is evidence that it is increasing. Therefore, the Commission considered it appropriate to draw up this statement of principles to encourage financial institutions conducting derivatives business to do so in a prudent manner and with the necessary skills, systems and controls in place to ensure that the risks are handled properly.'

Mr Crook adds that the Commission has closely followed the current debate about the use of derivatives in financial markets and recognises the political pressure worldwide for regulatory action.

He says: 'Using derivatives may be a useful way of protecting against risk. But they are complex and sophisticated instruments that also enable operators to take risks and they can be dangerous if used inappropriately and without adequate controls.'

For further information contact Peter Crook on Tel: +44 (0) 1481 712 706 or Fax: +44 (0) 1481 712 010.

The contents of this article are intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.