IMF Queries Derivatives Reform Effectiveness |
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March 29, 2011
New regulations aiming to reform the vast derivatives markets may fail to remove systemic risks or prevent the need for another taxpayer bail-out of the financial system, according to a research paper published by the International Monetary Fund.
New regulations aiming to reform the vast derivatives markets may fail to remove systemic risks or prevent the need for another taxpayer bail-out of the financial system, according to a research paper published by the International Monetary Fund. The reforms, which shift derivatives to clearing houses in an effort to dilute the impact of a default of a large dealer, could result in more risks for the financial system and alternative policies such as a tax on banks’ derivatives liabilities should be considered, the IMF paper said. The concerns add further fuel to the debate about how best to reform the $583,000bn over-the-counter derivatives markets, dominated by swaps trades. The passage of the Dodd-Frank Act in the US last July mandated that, where possible, swaps be pushed on to clearing houses and traded on exchanges or on swap trading venues.
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