Author(s):
Pauline Gandré, Mike Mariathasan, Ouarda Merrouche and Steven Ongena
Date:
May 2020
Abstract:
We investigate regulatory arbitrage during the G20’s global derivatives market reform. We handcollect comprehensive data on the staggered reform process and show that its progress is primarily driven by structural time-invariant factors. Following the reform banks shift up to 70 percent of their derivatives activity towards less regulated jurisdictions. This shift is driven by reform items – such as the promotion of central clearing – that are costly, but do not directly benefit them. Subsidiaries in jurisdictions with more regulatory progress shift into riskier portfolios.
Link:
CEPR Discussion Paper: Unintended Consequences of the Global Derivatives Market Reform