Instead of controlling and mitigating risk, forcing derivatives through central counterparties (CCP) could exacerbate risk in the system, creating a delicate structure that really is too big to fail.
That was the opinion of a panel of in-house bankers’ counsel, speaking at the PLI conference on Securities Regulation in Europe last week.
“Central clearing is not a panacea that removes systemic risk from the market,” said Simon Dodds, general counsel at Deutsche Bank in London. “It centralises and concentrates risk so that the central counterparty truly is too big to fail.”...