༡)

10)

c)

Do you feel that any of the "Recommendations for Dealers and EndUsers contained in the Group of Thirty report (Recommendations 1-20) should be formally mandated by regulation? Please comment on the different issues addressed in the recommendations with specificity.

Please comment on the four "Recommendations for Legislaturs, Regulators, and
Supervisors' contained in the July 1993 Group of Thirty report

(Recommendations 21-24) as they are relevant to your agency. Please comment
on each recommendation separately.

If the July 1993 Group of Thirty "Recommendations for Dealers and End Users"
(Recommendations 1-20) are not implemented by regulation, are there adequate
mechanisms in place to ensure that such recommendations will be self-
implemented? Concern has arisen regarding whether or not one can depend
solely on the forces of managerial responsibility and market discipline as sufficient
incentives to motivate firms to incur the implementation costs of the

recommendations. Does your agency believe that mechanisms, such as periodic
surveys of industry practice, a timetable for implementation, or a monitor of such
actions are warranted?

11)

12)

13)

14)

15)

Please comment on whether institutions should be required to establish
separately-capitalized subsidiaries to conduct derivative activities.

Do you believe the netting provisions contained in the Bankruptcy Code,
FIRREA, and FDICIA should be conformed to a single standard? Do the netting
provisions in these statutes adequately cover all situations? If not, what situations
do and don't they cover?

Recommendations contained in the July 1993 Group of Thirty Report
(Recommendation 20) and elsewhere state that until harmonized accounting and
disclosure standards are set, certain disclosures should be made by dealers and
end-users. Although a disclosure regarding credit risk is recommended, a similar
disclosure for market risk is not mentioned. Should a summary measure of
market-risk exposure be disclosed? If so, what form should such a measure take?

Please comment on the notion of establishing a clearinghouse offset mechanism for swaps transactions. How would a clearinghouse offset separately effect dealers and end-users? Would either benefit more than the other?

Are there adequate mechanisms currently in place to protect unsophisticated endusers of derivative products? If not, what are your recommendations?

3

16)

17)

What kind of stress test simulations do you recommend to account for the
different types of risk which arise as a result of financial derivative activity?

Please comment on your agency's view of the proper use and level of collateral in derivative transactions.

18)

19)

20)

21)

When assessing a counterparty for credit risk, how much relative emphasis should be placed upon factors such as capital, disclosure and credit rating? For example, should a credit rating be a proxy for capital?

Are executive decisions regarding derivatives, on average, concentrated in too few individuals in each institution to catch problems in a timely manner? Should the decision-making process, where derivatives are involved, be decentralized to enhance internal controls?

Do compensation policies currently in place adequately discourage undue risktaking? For example, if employees benefit financially from risk-taking in a direct manner, bow is such risk-taking controlled?

What is the level of systemic risk resulting from derivative activities? Do you agree with those who assert that derivative activities are concentrated in too few institutions?

22)

23)

24)

Cash liquidity risk for a firm appears to be of greater concern the greater is a firm's involvement in derivative activities, the greater is its reliance on short-term funding, the lower is its credit standing, and the more restricted is its access to central bank discount or borrowing facilities. Therefore, in contrast to depository institutions who, among other things, have access to the discount window, securities firms may find cash management requirements, such as maintaining margin requirements, arising from large derivatives portfolios to be more challenging. Compared to depository institutions, how does the less liquid nature of the securities business effect its derivative activities and the risks associated with such activities?

Criticism of speculators in the derivative markets, primarily exchange-traded derivatives such as currency futures and options, has focused on the alleged ability of such speculators to manipulate markets. Concerns have also arisen as to potential depository institution exposure as a result of speculators' activities. Please comment on these criticisms and whether or not such speculators should be subject to increased regulation or supervision.

What, if any, effect will the depositor preference provision of the Omnibus Budget
Reconciliation Act of 1993 have on the derivatives market?

LIBRAN

Notice: This opinion is subject to formal revision before publication in the Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify the Clerk of any formal ors-in order that corrections may be made before the bound volumes go to press.

QVINGTON & BUPLING

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Appeal from the United States District Court
for the District of Columbia

(D.D.C. No. 92cv00422)

Terence P. Ross argued the cause for appellants. With him on the briefs were Theodore B. Olson and Jerry S. Fowler, Jr.

Lutz Alexander Prager, Assistant Deputy Corporation Counsel for the District of Columbia, argued the cause for appellee the District of Columbia. With him on the brief were John Payton, Corporation Counsel for the District of

Bills of costs must be filed within 14 days after entry of judgment. The court looks with disfavor upon motions to file bills of costs out of time.