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Unintended Consequences of the Global Derivatives Market Reform

Pauline Gandré, Mike Mariathasan, Ouarda Merrouche and Steven Ongena ()

No 2021-36, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: The G-20’s global over-the-counter (OTC) derivatives market reform has caused a dramatic shift in the geography of the global derivatives market. Following the early implementation of the reform in the US and associated increase in the cost of trading derivatives, US banks shifted up to 60 percent of their OTC derivatives activity abroad, particularly towards less regulated jurisdictions. This implies an increase in global risk as risk is shifted to jurisdictions that are less prepared to monitor it and deal with the consequences. Further, we find that foreign subsidiaries in more tightly regulated jurisdictions have increased risk-taking overall.

Keywords: Bank regulation; Regulatory arbitrage; OTC Markets; Derivatives; Cross-border financial institutions; Financial risk. (search for similar items in EconPapers)
JEL-codes: G15 G18 G21 G23 G28 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2021
New Economics Papers: this item is included in nep-cwa and nep-rmg
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Working Paper: Unintended Consequences of the Global Derivatives Market Reform (2020) Downloads
Working Paper: UNINTENDED CONSEQUENCES OF THE GLOBAL DERIVATIVES MARKET REFORM (2020) Downloads
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