Clearing house push created unforeseen systemic risks

GetContentCapital controls and a prospective shortage of eligible collateral due to quantitative easing threaten to lower dealer liquidity, with potential consequences for the regulation of securities and derivatives central counterparties (CCP), writes John Dizard in the FT.

“The reformers among [the US officialdom] had been convinced that forcing banks to move uncollateralised, trust-me, bilateral swaps transactions into collateralised, marketable instruments traded on CCP platforms would do much to end systemic risk.

Now they are beginning to see that there are some unforeseen consequences to their attempt to shift risks from taxpayer-underwritten banks to ‘the market’.”

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