US, UK and European regulators pledges to crackdown on derivatives trading risk, increase supervision and tighten cross border regulation could actually create regulatory arbitrage.
According to lawyers that spoke exclusively to the IB Times UK, the London Whale event, which lost JP Morgan 2 billion dollars in bad bets this year, reignited the debate for tighter and more seamless global regulatory practices.
Lawyers at Lewis Silkin and Reed Smith say that we are in a three way tug-of-war involving bank regulators in the EC, the US and the UK AND Hong Kong and Singapore as possible destinations for banks wishing to flee US or EU regulation.
JP Morgan's CEO Jamie Dimon is currently defending the banks practices in front of US officials, after the bank's Chief Investment Office lost at least 2 billion dollars in bad hedging bets.
While the loss has been contained with the bank, the incident added fuel to regulators calling for tighter cross border trading regulation.
Only recently, Commodity Futures Trading Commission chairman Gary Gensler - called for new derivatives rules to extend outside US jurisdiction and into other territories.
Gensler argued that risk from financial companies' overseas branches and affiliates "inevitably flows back to the United States."
He added: "Recent events at JP Morgan are a stark reminder of how swaps traded overseas can quickly reverberate, with losses coming back into the United States
I'm Lianna Brinded. For more Business and Economy news, check out our website: ibtimes.co.uk
