Measured doses

29 June 2009

The Bank for International Settlements says they could be overseen the same way, with safe ones widely available, risky ones doled out carefully and new ones subject to rigorous tests. The trouble is, safety can be hard to judge. BIS must also press for better disclosure.

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The Baslebased Bank for International Settlements released its 79th annual report on June 29. One of its proposals for making the financial system safer is for watchdogs to adopt a registration approach that would limit investor access to products according to their level of safety, in a manner similar to the regulation of pharmaceuticals.

Under such a scheme, the BIS said, "the safest securities would, like nonprescription medicines, be available for purchase by everyone; next would be financial instruments available only to those with an authorisation, like prescription drugs; another level down would be securities available in only limited amounts to prescreened individuals and institutions, like drugs in experimental trials; and, finally, at the lowest level would be securities that are deemed illegal." Some products might be moved up into more easily accessible categories only after testing how they behave under stress.

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