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Unintended Consequences of the Global Derivatives Market Reform

Author

Listed:
  • Pauline Gandré

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Mike Mariathasan
  • Ouarda Merrouche

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Steven Ongena

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.

Suggested Citation

  • Pauline Gandré & Mike Mariathasan & Ouarda Merrouche & Steven Ongena, 2021. "Unintended Consequences of the Global Derivatives Market Reform," Working Papers hal-04159726, HAL.
    • Handle: RePEc:hal:wpaper:hal-04159726
    Note: View the original document on HAL open archive server: https://hal.science/hal-04159726
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    References listed on IDEAS

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    More about this item

    Keywords

    Bank regulation; Regulatory arbitrage; OTC Markets; Derivatives; Cross-border financial institutions; Financial risk.;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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