Previously, little has been written about how increased reliance on over-the-counter (OTC) derivatives activities and market structures by the internationally active financial institutions may have changed the nature of systemic risks in the international financial structure. This paper describes and analyses key elements of modern banking and the global OTC derivatives markets, highlighting areas that seem to be relevant for assessing their functioning, their implications for systemic financial risks in the international financial system and areas where improvements in financial stability can be obtained.