, 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. regular otc derivatives market statistics 11 may 2010. derivatives can pose systemic risks one of the key risks associated with otc derivatives is counterparty risk. counterparty risk depends on a complex set of factors including the underlying value of the asset, the creditworthiness of the counterparty, and the interaction between the two. optimal models that can properly assess these risks remain under construction. furthermore, the lack of transparency of these markets plays an important role. with the strong growth of derivatives a complex network of bilateral dependencies has been created, opening up a web of interlinkages and contagion channels. this lack of transparency also makes it complicated to properly assess counterparty risk. legal certainty supports financial stability furthermore, otc derivatives do form part of a sometimes highly complex legal framework. over the last decades various branch organisations have undertaken the standardization of derivatives contracts, which is a means of diminishing legal risk of transactions. an international dispute resolution facility could in my view be a logical next step in these standardization efforts. it can lead to a further improvement of legal certainty and thereby – at least in an indirect way – support financial stability. improvement of stability through legal certainty how would legal certainty be achieved? the fact that the same contractual terms are used across the world implies that a decision in a dispute between two parties may have implications that go beyond their specific contractual relation. the interpretation of a local court of a standard contract term might differ significantly from what the parties involved and the market would expect. the result : legal uncertainty for other transactions. this would also be true for disputes regarding transactions for which a court in another jurisdiction is competent ; in the end, the same contractual terms are at stake. therefore, the standardization efforts in the globalised markets can be partly hampered by decentralized and non - coordinated dispute resolution and interpretation of contractual terms. one universal court with judges and arbitrators specialised in this specific subject matter could reduce legal risks. but what should such a universal financial court look like? and how should it function to promote financial stability? these specific legal issues obviously are not the core business of a central bank, but i am happy to share some thoughts on this matter. the basic idea behind this is actually quite simple : legal certainty. tribunal of public

joachim wuermeling : brexit - implications for uk branches of german banks speech by prof joachim wuermeling, member of the executive board of the deutsche bundesbank, at the embassy of the federal republic of germany, london, 14 february 2019. * * * 1 introduction ladies and gentlemen, from the perspective of a bank and from my perspective as a banking supervisor, the future regime under which banks and companies in general will operate after 29 march 2019 remains unclear. and whether we like it or not, a hard brexit has become increasingly likely. 2 implications of uk branches becoming third country branches this means that – given what we know at the moment – uk branches of german banks ( and ssm banks in general ) will need to become third country branches. certainly, the pra ’ s temporary permissions regime buys time. nevertheless, there is no alternative to conversion into third country branches. the pra has already received some applications for third country branch authorisation in the uk. for german banks, unlike other ssm banks, there is no formal requirement for the home supervisor to approve a third country branch. however, given the aim of establishing a level playing field among all current and future ssm banks, you should expect the ssm to address certain requirements via other supervisory measures where necessary to ensure that the future set - up of the new third country branches is in line with ssm expectations. this means that the ssm will not accept empty shells, neither from incoming nor from outgoing banks. a third country branch will not be allowed to perform central functions for its ssmdomiciled group. and any outsourcing must not hamper the efficient and effective supervision of ssm entities. not all ssm banks are currently fully compliant with the ssm ’ s respective supervisory expectations. in particular, all banks must ensure that they have relocated sufficient staff to the eu27 entities. eu business must be booked from within the eu27. this will require significant asset transfers in several cases. sufficient trading and risk - management staff as well as technical infrastructure are needed on site at the eu27 entities to ensure adequate risk management. 3 split of responsibilities between pra and ssm making the transition from the eu28 to the eu27 as smooth as possible for the financial sector will require close cooperation between the ssm and the pra. the details of such a split of responsibilities are currently being negotiated. i am convinced that london will remain an important financial centre after brex