CDSs Will Come Under Close Scrutiny: EU's Barnier
Credit default swaps (CDS) will be looked at closely to ensure transparency but they aren't necessarily going to be banned, EU Financial markets commissioner Michel Barnier told CNBC Thursday.
"I never used the word ban. However I will look very closely at specific derivative products like CDS on sovereign debts and the speculative risks attached to them," Barnier said.
"I want to add transparency, light, control. We need to understand who is doing what", he said.
Greece repeatedly accused speculators in the derivatives market of pushing the country towards the brink by placing "naked" CDS bets – where investors do not own the underlying bond – that the government will default on its debt.
Barnier, who was on his second visit to London in a month, said he heard Prime Minister Gordon Brown's and Chancellor Alistair Darling's requests to have more time to negotiate a European directive to regulate hedge funds and private equity.
"I'm going to help find a good agreement in June so we achieve a positive result on hedge fund and private equity regulations, one that's intelligent and effective," he said.
Bankers in the City complain about the cumulative effects of so many new regulations, particularly when it comes to capital requirements.
But Barnier said the G20 pledged to take measures to recapitalize banks after the crisis to make the financial sector stronger, and he was just following that roadmap.
"We need to find the right balance in time and in measure," he added.
- Wacth the full interview with Michel Barnier above.