Wall Street banks 'attempting to avoid derivatives rules'

3 December 2012

Several Wall Street banks are trying to help their offshore clients avoid incoming rules relating to derivatives.

Industry insiders have told Reuters that major financiers including Goldman Sachs and Morgan Stanley are attempting to sidestep the new regulations - which come into effect at the start of 2013 - by routing trades through their overseas divisions.

Under the terms of the incoming rules - which form part of the Dodd-Frank reforms - lenders will effectively be required to set aside capital in order to protect their balance sheets against the possibility of trading activities turning sour.

The changes have been designed in a bid to ensure there is no repeat of the situation at the onset of the global banking collapse, where these toxic deals were partly to blame for the issues encountered by firms such as Lehman Brothers.

However, banks are actively seeking loopholes in the new regulations and Thomas Cooley, professor of economics at New York University's Stern School of Business, told the news source this process is a "gamesmanship dance".

By Claire Archer

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