‘Speculative’ Sovereign CDS Sales Could Face Ban, Barroso Says

Discussion in 'Wall St. News' started by ASusilovic, Mar 9, 2010.

  1. March 9 (Bloomberg) -- Traders could be banned from selling some sovereign credit default swaps in the wake of the Greek debt crisis, European Commission President Jose Barroso said today.

    The commission will examine “the relevance of banning purely speculative naked sales on CDS of sovereign debt,” Barroso said in a speech at the European Parliament today.

    “If it is true that the current problems in Greece were not caused by speculation on the financial markets, it is also true that this speculation was an aggravating factor,” said Barroso.

    European banks and regulators met with the European Commission March 5 to discuss regulation of the sovereign credit-default swaps market amid concerns over Greece’s fiscal woes. German Chancellor Angela Merkel and Christine Lagarde, France’s finance minister, have criticized the products amid concerns they can distort bond market perceptions.

    Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent if a country or company fails to adhere to its debt commitments. Traders in naked CDS buy and sell insurance on bonds they don’t own.

    --Editors: Peter Chapman, Anthony Aarons

    To contact the reporters on this story: Ben Moshinsky in Brussels at bmoshinsky@bloomberg.net

    To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net