The primary federal banks' regulators have established guidelines for derivatives usage at banks that includes the following:
I. Banks must establish internal guidelines regarding hedging activity.
II. Banks must establish trading limits.
III. Banks are prohibited from using derivatives to speculate.
IV. Banks must disclose large derivatives positions that may materially affect stakeholders in their financial statements.

Question

Quizplus · Accepted Answer

The primary federal banks' regulators have established guidelines for derivatives usage at banks that includes the following: Banks must establish internal guidelines regarding hedging activity (I). Banks must establish trading limits (II). Banks are prohibited from using derivatives to speculate (III). Banks must disclose large derivatives positions that may materially affect stakeholders in their financial statements (IV). Therefore, the correct choice(s) are I, II, and IV. Option A is incorrect because it only includes I and II. Option B is incorrect because it includes I, III, and IV, and excludes II. Option D is incorrect because it includes II, III, and IV, and excludes I. Option E is incorrect because it includes all four optionals but there’s no such regulation that banks must not use derivatives to speculate. So, it is not a correct choice.

The Primary Federal Banks' Regulators Have Established Guidelines for Derivatives