Over the past decade, clearinghouses have subsumed the management of counterparty risk for many financial transactions. Regulators and supervisors thus face a new nexus for risk in financial markets, where these institutions have become too important too fail. At the same time, new technologies – in particular blockchain or distributed ledgers – have emerged that promise potentially large efficiency gains for settling financial transactions.
The course will expose participants to current trends in the institutions that control counterparty risk in financial markets and will discuss the challenges that these developments bring along with them for regulating and supervising such institutions.
The following questions will be addressed in the course:
How do central clearing, collateral and margin policies affect risk across financial markets?
What are the key challenges faced by regulators when critical infrastructure operates in a cross-border environment?
What is the impact of Fintech on collateral demand and collateral management? How can blockchain technology be harnessed for making settlement of financial transactions more efficient?
What should regulators do to control the aggregate risk that critical infrastructure is taking on and how should they react if such infrastructure is at the risk of failing.
The course will present empirical and theoretical insights to answer these questions.
You will learn about the critical role Financial Markets Infrastructure (FMI) plays in containing and reducing counterparty risk
You will be exposed to challenges regulators face when designing and monitoring FMI
You will learn about how new technology (blockchain, distributed ledger and fintech) could influence the future design of FMI
You will get first-hand accounts about current projects that modernize existing infrastructure or introduce new solutions for clearing and settlement
You will get an understanding of the issues policy makers face when confronted with the need of recovering or resolving critical infrastructure