The European Parliament’s decision impairs the ability of companies and pension funds to manage credit risk and will be potentially harmful in managing systemic risk. It will make financial markets less liquid and add uncertainty for European companies looking to hedge risk.
Moreover, the European Commission has found no evidence whatsoever that sovereign CDS have had a significant impact on sovereign debt prices. The increased sovereign CDS activity is largely due to new capital rules, introduced by the European Commission itself, that encourage banks to purchase sovereign CDS to manage risk of swap transactions with sovereign states. AFME strongly urges Member States to resist introducing these measures.
Press release
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