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OTC derivatives: financial stability challenges and responses from authorities

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  • Russo, D.

Abstract

The importance of well-functioning over-the-counter (OTC) derivatives markets for fi nancial stability was highlighted during the financial market turmoil, when significant shortcomings in risk management and market transparency were exposed. In response to these experiences, public authorities have launched a series of measures to strengthen OTC derivatives markets. This article provides an overview of this work. It explains the significance of well-functioning OTC derivatives markets and discusses the main lessons from the financial crisis regarding the need to strengthen their resiliency and transparency. Then, we describe the main tools under consideration, relating to the use of sound market infrastructures – central counterparties and trade repositories –, enhanced bilateral risk management as well as to cooperation between regulators and overseers of infrastructures and banking supervisors. We finally describe the state of play of the main initiatives within these areas.

Suggested Citation

  • Russo, D., 2010. "OTC derivatives: financial stability challenges and responses from authorities," Financial Stability Review, Banque de France, issue 14, pages 101-112, July.
    • Handle: RePEc:bfr:fisrev:2010:14:12
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    Cited by:

    1. Gabriel Aparici & Pablo Furche & Fernando Sepúlveda & Catherine Tornel, 2013. "Mercado de Derivados y su Infraestructura: Aspectos Relevantes de la Discusión Internacional y su Aplicación en Chile," Economic Policy Papers Central Bank of Chile 45, Central Bank of Chile.
    2. Michele Bonollo & Irene Crimaldi & Andrea Flori & Laura Gianfagna & Fabio Pammolli, 2016. "Assessing financial distress dependencies in OTC markets: a new approach using trade repositories data," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(4), pages 397-426, November.
    3. Russo, D., 2013. "CPSS-IOSCO Principles for financial market infrastructures: vectors of international convergence," Financial Stability Review, Banque de France, issue 17, pages 69-78, April.
    4. Michele Bonollo & Irene Crimaldi & Andrea Flori & Laura Gianfagna & Fabio Pammolli, 2015. "Assessing financial distress dependencies in OTC markets: a new approach by Trade Repositories data," Working Papers 10/2015, IMT School for Advanced Studies Lucca, revised Oct 2015.

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