London risks further damage as a financial centre if policymakers rush to regulate the over-the-counter derivatives markets without distinguishing between instruments that helped cause the financial crisis and those that did not, a report commissioned by the City of London Corporation said on Monday.

The report, prepared by consultancy Bourse Consult, will urge regulators not to “throw the baby out with the bathwater” amid recent calls for OTC – or privately-negotiated – derivatives markets to be subjected to greater clearing and regulatory scrutiny.