The market needs to believe – and it needs to be the case – that every private financial institution can fail and be resolved under our laws without imposing undue costs on society. The current reform agenda is designed to accomplish just that, through two channels.
Secondly, often the corporate does not need derivative products to profit from its position but to reduce or eliminate the uncertainty from their future cash flows. Thus, the use of a derivative product by a corporate would have to be dictated by the character of its exposures, nature of the uncertainties and the risk appetite or aversion as embodied in its risk management framework.