Has the move to institute centralized clearing of derivatives actually increased systemic risk?...

|By:, SA News Editor

Has the move to institute centralized clearing of derivatives actually increased systemic risk? Some banks seem to think so, although one might reasonably question their objectivity given that the move to clearinghouses threatens to supplant OTC bilateral deals, which were lucrative for dealer banks. The worry is that clearinghouses are not yet adequately capitalized to fulfill their expanding role in the financial system. "If we move risk somewhere else, we obviously need to make sure there is enough capital to support it," one finance director tells FT.