The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.

Senior EC policymaker hints at G20 rethink on OTC derivatives

Central clearing and exchange trading of OTC derivatives is a concept so dear to regulators hearts that it has become something of a mantra for them – particularly since the demise of Lehman Brothers and the counterparty risks that were brutally revealed by that event. So when Patrick Pearson, head of financial markets infrastructure at the European Commission’s DG Markt unit stood up to address an ABS conference in London on June 15 his words took some in the audience by surprise. “Clearing houses don’t reduce counterparty risk,” he stated. “They simply redistribute it. Central counterparties (CCPs) can act as a channel for risk. Their failure is far more dangerous than the failure of one single counterparty.”

Hang on! The market has long worked on the assumption that central counterparty clearing will be mandated in Europe - it is just a question of when. Indeed, just days after Pearson’s speech European Central Bank Executive Board member Gertrude Tumpel-Gugerell commented that “Central clearing of OTC derivatives is an essential part of the regulatory reform to make this market sufficiently transparent and to allow supervisors and overseers to monitor the build-up of systemic risk effectively.”

Take out a complimentary trial

Take out a 7 day trial to gain unlimited access to and analysis and receive expertly-curated updates direct to your inbox.


Already a user?

Login now


We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree