Regulatory arbitrage

Regulatory arbitrage exists when actors in the international financial markets deliberately circumvent national regulations. They want price
or gain price advantages, for example when trading in risky loan receivables.

For this purpose, lawyers and finance professionals may well develop legal financial structures that are not covered by the applicable rules. The numerous national differences between the EU member states in regulating the financial markets offer banks in particular considerable profits through regulatory arbitrage.

However, they are not achieved through economic activity on transparent markets, but rather by exploiting the differences in laws, ordinances and regulations of the 27 EU countries. According to the International Monetary Fund, this is dangerous for Europe's financial stability.

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