Derivatives Regulation: Mood Swing?

A recent post on SerenDiPity quoted an FT article about the postponement of European OTC regulation and the continuing delays in implementing Dodd Frank in the US.

Is it time to call the top on Western lawmakers’ enthusiasm for clamping down on banks?

It feels as if popular panic about systemic risk in the derivatives industry is subsiding as this issue fades from newspaper front pages and public consciousness, at about the same rate as deep concern about the broader economic malaise in the US and Europe is intensifying. QE2 didn’t work, Greece is about to default, and the phrase “double-dip” has re-entered the American vocabulary. The state of the economy as a whole is rapidly becoming the real priority, and stimulating business is now more of a vote-winner than bashing bankers.

This being the case, it is beginning to dawn on politicians and regulators that restricting the freedom (and profitability) of financial institutions might not, after all, be exactly the right prescription for the coming few years.

I think OTC regulation is in retreat. The question is: how far?

2 Responses

  1. And right on cue, Howard Davis, a former director of the London Stock Exchange speaking today at a Sungard event at the Brewery in London said in reference to Basel III, “some say that if you make banks hold much more capital it will adversely affect credit and harm consumers”

    Via @LizLum on Twitter:

  2. […] couple of months ago I suggested that the wind had changed, with the primary focus of politicians and regulators shifting to the elusive […]

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