News
Rethinking Regulatory Structure – What Do Our Financial Markets Need?
By Dr. Stefan Mai
After decades of de-regulation in the global financial sector, 2010 will probably mark the beginning of a new era of re-regulation – though hopefully not of over-regulation. So far, the term “paradigm shift†used by some EU Commission officials to denote the new regime envisaged for EU financial markets under Internal Market Commissioner Michel Barnier allows a wide range of interpretations. At the very least, however, it means a move away from the previous emphasis on self-regulation.
Without doubt, the recent crisis has exposed various deficiencies in financial regulation in the EU: OTC trading in derivatives, especially in complex instruments such as credit default swaps, is still characterised by excessive bilateral exposures and too little collateralization. Risk valuation and risk management capabilities of both market participants and regulators have turned out to be insufficient. This is worsened by the fact that trading does not take place in a transparent environment. Finally, the OTC market for these instruments has operational inefficiencies and offers only limited legal certainty.
To read the whole article please refer to page 3 of the latest EFL-Quarterly:
Latest printed newsletter: | Second Issue, April 2010 |
