Member

This SI deals with intergroup transactions, which enable firms, in a sense, to shift the geographic location of risk. The SI gives regulators powers to provide permanent exemptions from clearing obligations and margin requirements. Again, this has a political aspect to it. I am always very concerned about BEPS—base erosion and profit shifting—which is where a company reduces its corporate tax bill by finding mechanisms where it needs to make payouts to overseas locations of low tax jurisdiction. These kinds of internal transaction, using the flow of derivatives, are an ideal instrument to use if you want to shift profit from one area to another. You simply do an unbalanced transaction: money flows in one clear direction, where it becomes profit, but in a country where corporate taxes are either zero or very low.