Skip navigation


Current DateTime: 03:23:11 16 Nov 2009
LinksList Documentid: 33482595

Current DateTime: 03:23:12 16 Nov 2009
LinksList Documentid: 24355697

FEATURED QUIZZES


Current DateTime: 03:23:12 16 Nov 2009
LinksList Documentid: 33793611
  • How Much Do You Know About Green?

      Green has become part of our everyday lives. Green is everywhere-- energy, clothing, food, housing, transportation. It's a big business and a global business.

  • The Billionaire BFF's

      Philanthropists. Bridge partners. Hockey players. Which responses are based on facts from Buffett's and Gates' real lives?

  • The Many Myths of Coca-Cola

      Can you tell which statements are true, and which ones are just rumors?


Current DateTime: 03:23:12 16 Nov 2009
LinksList Documentid: 24890560
  • Winterizing Your Portfolio

      If 2009 was the winter of our discontent, will 2010 be a winter wonderland for investors? A lot depends on the recovery—or lack thereof.

  • Investor's Guide to Real Estate

      Some even say the long-awaited recovery is here. Regardless, buyers and sellers alike can profit from our guide.

  • Alternative Investing

      Stocks and bonds? Sure. But it's a big world out there for investors.

powered by digg
Bernanke: Derivatives Management Needs Help
By: CNBC.com | 08 Jul 2008 | 11:25 AM ET
Text Size

The $62 trillion credit default swaps markets and other off-exchange financial instruments are not managed as well as they should be, Federal Reserve Chairman Ben Bernanke said Tuesday.

"The infrastructure for managing these derivatives still is not as efficient or reliable as that for more mature markets, as was evident last summer, when a surge in CDS trading volume greatly increased backlogs of unconfirmed trades," Bernanke said in remarks to a mortgage lending forum sponsored by the Federal Deposit Insurance Corp. The Fed chief's comments come as CDS dealers work on a number of systems to reduce credit risk, diminish backlogs and improve processing for these highly complex markets that are mostly unregulated. (Related Coverage: Credit to banks to be extended).

This issue was heightened with the near collapse of Bear Stearns earlier this year, as regulators and market participants feared the firm's CDS exposure was broad-based and would cause systemic risks in the market.

"The potential vulnerability of the financial system to the collapse of Bear Stearns was exacerbated by weaknesses in the infrastructure of financial markets," he said.

"Bear Stearns' counterparties on thousands of over-the-counter (OTC) derivatives contracts would likely have had serious difficulty promptly determining their vulnerability to counterparty losses," he added.

At present, a group of the major CDS dealers, accounting for roughly 90 percent of market activity, is working with the Federal Reserve Bank of New York to establish a clearinghouse.

Plans for that clearinghouse are still being mapped out and industry experts caution that there are some risks in centralizing credit risk into one entity.

The International Swaps and Derivatives Association is separately developing a system to help boil down the millions of trades that cancel each other out, which is expected to begin by the end of this month.

© 2008 CNBC.com
Tools:
Print EmailAdd This share icon
  • digg share

CNBC HIGHLIGHTS

  • CNBC's Jim Goldman asks: Has the sun begun to set on Twitter? Data suggests its best days are over.
  • Everyone wanted a piece of Madoff's "Bullship"--the famous buoy sold for $7,500 at auction. You won't believe these prices.
  • De Loach Vineyards is selling its pinot noir the old fashioned way, helping to cut energy and transportation costs.
  • Why are the Chinese concerned about the progress of U.S. health care legislation?
  • Snoop Dogg
  • CNBC's Maria Bartiromo talks to rapper Snoop Dogg about brand identity in both business and music.
ADD COMMENTS
Remaining characters


Current DateTime: 01:12:16 16 Nov 2009
LinksList Documentid: 29778428

Current DateTime: 10:28:53 16 Nov 2009
LinksList Documentid: 29779196

Current DateTime: 01:49:44 16 Nov 2009
LinksList Documentid: 29779199

Current DateTime: 10:42:55 16 Nov 2009
LinksList Documentid: 29779198
  Data is a real-time snapshot  *Data is delayed at least 15 minutes
Global Business and Financial News, Stock Quotes, and Market Data and Analysis

© 2009 CNBC, Inc.  All Rights Reserved.
A Division of NBC Universal
Thomson ReutersThomson Reuters