Clifford Chance

OTC derivatives reforms – Impact on cross-border business

29 June 2011

The reforms of over-the-counter (OTC) derivatives markets threaten the ability of international banking groups to centralise the risk management of their cross-border derivatives business. The resulting more regionalised booking models are likely to reduce client choice and competition, increase clients' risk management costs, distort market behaviour and create new risks to financial stability.

International banking groups currently use a number of different structures to book cross-border OTC derivatives transactions, providing important benefits to the firm and its clients/counterparties: good risk management and capital efficiency, compliance with licensing laws, maximising netting, meeting client/counterparty preferences and compliance with tax rules. These structures also improve the overall efficiency and resilience of the financial system.

Clifford Chance has produced a paper reviewing the possible impact of the OTC derivatives reforms on cross-border transactions and banks' booking structures and proposing possible solutions.

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