BIS Warns on Clearing System “Financial Seizure” Risk From $540T in Derivatives


The pillars of the global financial system are fundamentally unstable and could lead to a frightening chain-reaction in the next crisis, the world’s top watchdog has warned.

Giant “central counterparties” (CCPs) that clear much of the $540 trillion (£428 trillion) nexus of derivatives are themselves vulnerable to failure in times of extreme stress.

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This is a worry looming ever larger as rising US interest rates expose the weak links in global debt markets.

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The Bank for International Settlements (BIS) said in its quarterly report that the CCPs could cause “a destabilising feedback loop, amplifying stress.”

The implicit message is that well-meaning regulators may have made the financial architecture…