ECB raises concerns over CDSs

Despite the efforts of traders and regulators over the past 12 months, credit derivatives remain a source of large and unknown systemic risk, the European Central Bank (ECB) has warned.

In its December Financial Stability Review, the ECB raises particular concerns over the risks posed to market liquidity by structured credit instruments. In times of generally good credit quality, credit derivatives have improved systemic liquidity by attracting more heterogeneous investors to the credit