The Risk Controllers: Central Counterparty Clearing in Globalised Financial Markets

12

Shapers of Change

12.1 CHALLENGES OF THE NEW MILLENNIUM

The 2000s got off to a confident start, helped greatly by a nonevent. Fears that a computer bug (dubbed ‘Y2K’) would cause financial systems to crash and aeroplanes to drop out of the sky, because early software still in use would not cope with the shift in the year from 1999 to 2000, proved wrong. The first of January 2000 passed into history without mishap.

Instead a prosperous future appeared to beckon thanks in good part to financial innovation and benign regulation.

Governments were competing to improve the competitiveness of their economies and make it easier for companies and individuals to make money.

The US set the tone, repealing the 1933 Glass Steagall Act that separated investment and commercial banking in November 1999 and passing legislation a year later that kept OTC derivatives trading unregulated.

The UK's Labour government, elected in 1997, professed to be ‘intensely relaxed about people becoming filthy rich, as long as they pay their taxes’.¹ It placed financial regulation in the hands of a new Financial Services Authority that implemented a ‘light touch’ regulatory regime to boost the nation's financial sector.

The EU followed up the launch of the single currency on 1 January 1999 with a 42 point ‘Financial Services Action Plan’ (FSAP) to free up financial activity across national frontiers and create a single market for financial services. One of the FSAP's main goals was to lower the cost of trading ...