Hence, the large exposure regime which caps the investment in one single debtor has to be applied to sovereigns as well. Without addressing the regulatory treatment of sovereign exposures, I see no reliable way of breaking the sovereign-banking nexus. In my view, such regulations are an indispensable prerequisite for a healthy financial system in the longer run. 4.
By implication, the risks associated with financial innovation is nowadays a topic of heated debates among policy makers, market participants and academics worldwide. However, consensus exists that OTC derivatives markets have to become safer, more resilient and more transparent. 1  Regular OTC Derivatives Market Statistics 11 May 2010.