Friday, April 2, 2010

EU's Michel Barnier says new rules to curb CDS to be unveiled

Original posted in the Telegraph by Helia Ebrahimi:

The outspoken commissioner, who was in London on his latest tour of shuttle diplomacy, said that Brussels was planning major curbs on credit default swaps (CDS). He said that although he had not used the phrase explicitly, a ban could not be ruled out.

"I think we should be exploring all possibilities of regulation and transparency," he said, adding that a framework of rules would be unveiled in October.

In recent months Greece has accused speculators of using "naked" sovereign CDS contracts – where the holder has no stake in the underlying debt – to bet on the country's financial failure. As a result Mr Barnier pledged to introduce changes despite regulators in the UK and Germany failing to find evidence of major market abuse.

However, in an volte face, Mr Barnier also said he was now "very attentive" to criticism of the controversial hedge fund directive. "I'm listening to Washington," he said in an effort to smooth over the recent rift that emerged after Treasury Secretary Tim Geithner wrote to him complaining new rules were protectionist.

The commissioner also added his voice to the consensus among political parties in the UK for the introduction of a tax on banking transactions to pay for future bailouts.

"It's a debate that has started. There are many proposals, Franco-German, here in London and in the United States," he said. "I don't want to state a view ... But I do think a contribution is necessary and legitimate."

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