The recent financial crisis has revealed not only market failure and regulatory failure, but also failure of the narratives that inform the rules of financial law. The term ‘narrative’ is used to mean the deep structures of assumption which inform legal rules, but which are not always fully articulated in them, and which are most fully articulated in the case law. This article identifies three such narratives, namely the arm’s length, fiduciary and consumerist narratives. It finds that they are both inconsistent in practice and inherently limited in their ability to deliver virtuous outcomes, and thereby to command the imaginative assent of the regulated community. A possible new narrative, relating to the netting arrangements on which the derivatives markets rely, and based on the concept of mutuality, is recommended for the future development of financial law
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