Autonomy of Financial Institutions Research Paper

Autonomy of Financial Institutions - Research Paper Example While politicians and regulators propose a regulated trade system that would mitigate risks of default of one party, maintaining transparency, and providing consistent prices, the bankers pull in the complete opposite direction. The banks want the market to remain as it is whereby over the counter derivatives (OTC) remain unregulated and with unpublished prices to the public. Banks warn that any ban on the unregulated OTC will upset the current markets and lead to possible lawsuits. However, the European Commission maintains that its proposal for a regulation is meant to protect consumers, and spur competition. Thus, on this issue, bankers and politicians hardly see eye to eye. The U.S, as an answer too to the Great Depression, also passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, geared towards more regulations for the financial institutions. However, it lacks the cutting-edge proposal of banning the over the counter derivatives. It should be remembered that these proposals are law in no shortage of critics. While some people, especially bankers, say that it encroached too deeply into the financial institutions’ regulations; others argue that it is hard enough to curtail the possibility of another financial meltdown.  If the banks continue in the direction where there are no published prices for the OTC, no specified quantity and quality on the deliverable, then there is an obvious lack of transparency. This grey region only benefits the  banks. It cushions them from taking the responsibility of the financial losses.  Bankers argue that the small companies which have not attained the exchange listing requirements will be l ocked out of the securities trade if the government bans the OTC. Markets in Financial Instruments Directive (MiFID) proposal is clear cut- it wants to ban the over the counter derivatives.