EC to introduce tougher rules on speculative trades, commissioner claims

18 March 2010

The European Commission (EC) has pledged to implement more legislation on credit default swaps (CDS) as part of regulatory reform for the financial services industry.

According to the body, wide-ranging reforms could cover hedge funds, CDS and private equity as part of a strategy to increase confidence within the sector.

Michel Barnier, EU internal markets commissioner, was quoted by, as saying that he hopes for a “good agreement” with the US and other nations on new regulations for ‘alternative investments’.

"80 per cent of these (instruments) are exempt from regulation ... we need to invert those percentages,” he explained.

New proposals from the EC could be unveiled as soon as June, reports have claimed.

The use of CDS has come under recent scrutiny by governments and financial regulators following their role in Greece’s economic crisis.

Investment banks including Goldman Sachs are alleged to have used CDS to massage Greece’s debt figures.

However, while governments have claimed that greater regulation of these derivatives is required, both the US and the UK have questioned the worth of an outright ban on the trades.

By Jim Ottewill

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