<<Will a dislocation in the gold derivatives market precipitate other derivative problems, perhaps in the swaps or currency markets?>>
What Ms. Bies had to say back then:
(in part - Y2k stuff left behind)
Ms. Bies.
STATEMENT OF SUSAN SCHMIDT BIES, EXECUTIVE VICE PRESIDENT, RISK MANAGEMENT, FIRST TENNESSEE NATIONAL CORPORATION
Ms. BIES. All right. I guess if I have got one minute, the key issue I want to point out is our concern at First Tennessee that the new accounting is not reflective of what we do to meet our customer needs.
First, we know that our customers are going to want to do long-term fixed rate loans when rates are low, and that is exactly when they are going to want to have deposits that are short, so they can get higher interest rates later. And because of that, it puts the bank at risk.
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This new accounting that is being proposed is going to mean, depending on the way we hedge the risk, we will have different accounting results. Whether we hedge the loan side or we hedge the deposit side, we will have inconsistent accounting for the same economic event, which doesn't make sense.
The second point is, as a risk manager, when you look at all the publicized events that have happened in the past that have been ''derivative'' surprises, they have been due to poor risk management practices and not accounting. Risk management has come a long way in the last three to four years. There now exist readily-available best-practice benchmarking risk practices. What happened in the past surprises were failures in audit and internal controls, and the public accounting firms share that blame. We now all need to address audit and control issues, and you can't do that through accounting.
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